Working with Michelle Delatorre, the tennis pro discussed in the Integrative Problems in Chapters 4 and 5, has required you to put in a great deal of overtime, so you have had little time to spend on your personal finances. It is now April 1, and you have only two weeks left to file your income tax return. You have managed to gather together all of the information that you will need to complete your return.
a. The firm for which you work, Balik and Kiefer, Inc., paid you a salary of $50,000, and you received $3,000 in interest from a bond that you own. You are single and plan to use the standard deduction rather than itemize expenses.
(1) On the basis of the information given in the problem and the individual tax rate schedule given in Table 6A-1, what is your tax liability?
(2) What are your marginal and average tax rates?
b. You also compute the taxes for the corporation that your parents own. This company has $100,000 of taxable income from operations plus $5,000 of interest income and $100,000 of dividend income. During the previous year, the company paid dividends equal to $8,000. What is its tax liability?
c. Assume that after paying your personal income tax, as calculated in part (a), you have funds to invest. You have narrowed your investment choices to California bonds with a yield of 7 percent or AT&T bonds with a yield of 10 percent. Which investment should you choose and why? At what marginal tax rate would you be indifferent between choosing the California bonds and the IBM bonds?

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