Mary Jarvis is a single individual who is working on filing her tax return for the previous year. She has assembled the following relevant information:

-She received $82,000 in salary.

-She received $12,000 of dividend income

-She received $5,000 of interest income on Home Depot bonds.

-She received $22,000 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of $9,000.

-She received $10,000 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $7,500.

-Mary receives one exemption ($4,000), and she has allowable itemized deductions of $7,500. These amounts will be deducted from her gross income to determine her taxable income.

-Assume that her tax rates are based on the tax table presented below: 2015 Individual Tax Rates:

SINGLE INDIVIDUALS:

If Your Taxable Income is:	You Pay this Amount on the Base of the Bracket	You Pay this Amount on the Base of the Bracket	Average Tax Rate at Top of Bracket
Up to $9,225	$0	10.0%	10.0%
$9,225-$37,450	922.50	15.0%	13.8%
$37,450-$90,750	5,156.252	5.0%	20.4%
$90,750-$189,750	18,481.252	8.0%	24.3%
$189,750-$411,500	46,075.25	33.0%	29.0%
$411,500-$413,200	119,401.25	35.0%	29.0%
Over $413,200	119,996.25	39.6%	39.6%

NOTES:

1. These are the 2015 tax rates that will be paid on tax returns due on April 15, 2016. The income ranges at which each tax rate takes effect are true with inflation, so they change each year.

2. The average tax rates are always below the marginal rats, but in 2015 the average at the top of the brackets approaches 39.6% as taxable income rises without limit.

3. In 2015, a personal exemption of $4,000 per person or dependent could be deducted from gross income to determine taxable income. Thus, a husband and wife with two children would have a 2015 exemption of 4 * 4,000 = 16,000. The exemption increases with inflation, but if gross income exceeds certain limits, the exemption is phased out, and this has the effect of raising the effective tax rate on incomes over the specified limit. In addition, taxpayers can claim itemized deductions for charitable contributions and certain other items, but these deductions are also phased out for high-income taxpayers. In addition, there are Social Security and Medicare taxes. These additional situations and payroll taxes push the 2015 effective tax rate up well above 39.6%.

(a). What is Mary's federal tax liability?

(b). What is her marginal tax rate?

(c). What is her average tax rate?

Answer rating: 100% (QA)

Income from salary 82000 Dividend received 12000 Interest income on home depot bonds 50... View the full answer