Question

Qi, Julian, and Omar are all in the 24% tax bracket. Qi has received $3000 in corporate bond interest, Omar $2500 in savings account interest, and Julian $2500 in dividends from a US corporation. Rank the taxpayers by their tax liability from the amounts received, from least to greatest.

Answer 1

TAX LIABILITY FROM THE AMOUNTS RECEIVED FROM LEAST TO GREATEST

1.Julian received $2500 in dividends from a US Corporation

There are two type of dividend -qualified and non qualified

qualified are taxable at 15% if the tax payer are under 24% bracket

Non qualified are taxable at same regular tax percentage

we assume JULIAN dividend is qualified so $2500 tax @ 15%=$375

2 Omar received $2500 saving account interest

As per Law saving account interest is taxable at the same rate under bracket

so Tax rate is 24% so tax is $2500@24%=$600

3 QI received $3000 as interest on corporate bond

Interest on corporate bond is taxable at the same tax bracket while saving and govt bonds are exempt

so tax is $3000@24%= $720