Mr. Erwin’s marginal tax rate on ordinary income is 39.6 percent. His $958,000 AGI included a $24,900 net long-term capital gain and $37,600 business income from a passive activity.
a. Compute Mr. Erwin’s income tax on the $62,500 investment income from these two sources.
b. Compute Mr. Erwin’s Medicare contribution tax if the $62,500 is his net investment income for the year. What is Mr. Erwin’s marginal tax rate on long-term capital gain and on passive activity income?