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Determine the tax liability, marginal tax rate, and average tax rate in each of the following cases.

Use the Form 1040EZ Tax Tables and Tax Rate Schedules.
 
Single taxpayer, taxable income of $31,652.
Single taxpayer, taxable income of $84,612.
(Use the tax tables to compute tax liability. For all requirements, Round "Average tax rate" to 2 decimal places.)
 

   
The W-2 income of Sandra, a single taxpayer, was $86,742. Determine Sandra's tax liability.
Use the appropriate Tax Tables.
 
Sandra’s tax liability is $14,820.
 
Explanation
Sandra’s tax liability is $14,820.
The problem gives you Sandra’s W-2 income.
To determine taxable income (the number necessary to use the tax tables) you need to
subtract the permitted deduction of $10,400.
Sandra’s taxable income is $76,342.
 
Tax Tables
   
3. Determine the tax liability, marginal tax rate, and average tax rate in each of the following cases.

Use the Form 1040EZ Tax Tables and Tax Rate Schedules.
 
Married taxpayers, who file a joint return, have taxable income of $36,119.
Married taxpayers, who file a joint return, have taxable income of $59,484.
(Use the tax tables to compute tax liability. For all requirements, Round "Average tax rate" to 2 decimal places.)
 
 
Use the Tax Rate Schedules to determine the tax liability for each of the following cases.
(Round your intermediate computations and final answers to 2 decimal places.)
 
Single taxpayer, taxable income of $30,490.
Single taxpayer, taxable income of $62,238.
Married taxpayers, who file a joint return, have taxable income of $36,119.
Married taxpayers, who file a joint return, have taxable income of $77,384.
Married taxpayers, who file a joint return, have taxable income of $25,657.
Single taxpayer, taxable income of $92,550.
 
 
Sheniqua, a single taxpayer, had taxable income of $66,938.
Her employer withheld $12,042 in federal income taxes from her paychecks throughout the year.
What is the amount of refund would Sheniqua receive or additional tax she would pay?
(Input your answer as a positive number.)

Use the appropriate Tax Tables.
 
 
Scot and Vidia, married taxpayers, earn $240,000 in taxable income and $5,000 in interest from an investment in City of Tampa bonds.
(Use the U.S. tax rate schedule for married filing jointly).

Required:

A) If Scot and Vidia earn an additional $80,000 of taxable income, what is their marginal tax rate on this income?
B) What is their marginal rate if, instead, they report an additional $80,000 in deductions?
 
A) 24.00%
B) 23.79%
   
Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively, Melinda
could have invested the $200,000 in a bond recently issued by Surething Inc., that pays 8 percent
interest and has risk and other nontax characteristics similar to the City of Heflin bond. Assume
Melinda's marginal tax rate is 25 percent.
(Leave no cells blank - be sure to enter "0" wherever required.)
 
Required:
A) What is her after-tax rate of return for the City of Heflin bond?
B) How much explicit tax does Melinda pay on the City of Heflin bond?
C) How much implicit tax does she pay on the City of Heflin bond?
D) How much explicit tax would she have paid on the Surething Inc. bond?
E) What is her after-tax rate of return on the Surething Inc. bond?
 
A) 6%
B) 0
C) 4,000
D) 4,000
E) 6%
   
Hugh has the choice between investing in a City of Heflin bond at 6 percent or investing in a
Surething Inc. bond at 9 percent. Assuming that both bonds have the same nontax characteristics
and that Hugh has a 40 percent marginal tax rate, in which bond should he invest?
 
City of Heflin
   
Which of the following statements are correct regarding the history of the U.S. personal income tax?
(Check all that apply.)
 
The income tax was once ruled unconstitutional
The 16th Amendment to the U.S. Constitution gives Congress the power to assess income tax on individuals.
   
Tori bought a dress costing $80 from Arlene's Dress Shop in a state where there is a sales tax.
The tax base is the price of the dress, and the tax rate is 6 percent.
What amount of tax did Tori have to pay on the purchase?
 
$4.80
   
Fergie has the choice between investing in a State of New York bond at 5 percent and a
Surething Inc. bond at 8 percent. Assuming that both bonds have the same nontax
characteristics and that Fergie has a 30 percent marginal tax rate, what interest rate does
the state of New York bond need to offer to make Fergie indifferent between investing in the two bonds?
 
5.6%
   
Hugh has the choice between investing in a City of Heflin bond at 6 percent or investing in a
Surething Inc. bond at 9 percent. Assuming that both bonds have the same nontax characteristics,
and that Hugh has a 40 percent marginal tax rate, what interest rate does Surething Inc.
need to offer to make Hugh indifferent between investing in the two bonds?
 
10%
   
Which of the following taxes uses a proportional tax rate structure?
 
federal corporate tax
   
Given the following tax structure, what minimum tax would need to be assessed on Shameika to make the tax progressive
with respect to effective tax rates? (Round your final answer to nearest whole dollar amount.)

Taxpayer         Salary              Muni-Bond Interest    Total Tax
Mihwah           $10,000           $10,000                       $600
Shameika         $50,000           $30,000                       ???
 
$2,401
   
What types of taxpayers are likely to respond in this manner?
 
Government's tax revenues would decrease by $1,250
   
Given the following tax structure,

Taxpayer         Salary              Total Tax
Mae                 $10,000           $600
Pedro               $20,000           ???

a. What is the minimum tax that Pedro should pay to make the tax structure vertically equitable
with respect to the amount of tax paid?
$601
 
b. This would result in what type of tax rate structure?
regressive
   
Which of the following statements describes implicit taxes?


a) The increased after-tax return that a tax-favored asset produces because of its tax-advantaged status
b) The reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status
c) The increased before-tax return that a tax-favored asset produces because of its tax-advantaged status
d) The reduced after-tax return that a tax-favored asset produces because of its tax-advantaged status
b) The reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status
   
Chuck, a single taxpayer, earns $75,000 in taxable income and $10,000 in interest
from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule.)


a. If Chuck earns an additional $40,000 of taxable income, what is his marginal tax rate on this income?
a. 23.54%


b. What is his marginal rate if, instead, he had $40,000 of additional deductions?
b. 20.88%
   
Campbell, a single taxpayer, earns $400,000 in taxable income and $2,000 in interest
from an investment in State of New York bonds.


a. If Campbell earns an additional $15,000 of taxable income, what is her marginal tax rate on this income?
35%

b. What is her marginal rate if, instead, she had $15,000 of additional deductions?
35%
   
Jorge and Anita, married taxpayers, earn $150,000 in taxable income and $40,000
in interest from an investment in City of Heflin


a. If Jorge and Anita earn an additional $100,000 of taxable income, what is their marginal tax rate on this income?
23.62%


b. What is their marginal rate if, instead, they report an additional $100,000 in deductions?
19.11%
   
Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest.
Alternatively, Melinda could have invested the $200,000 in a bond recently issued by
Surething Inc., that pays 8 percent interest and has risk and other nontax characteristics
similar to the City of Heflin bond. Assume Melinda's marginal tax rate is 25 percent.


a. What is her after-tax rate of return for the City of Heflin bond?
6%
 
b. How much explicit tax does Melinda pay on the City of Heflin bond?
$0
 
c. How much implicit tax does she pay on the City of Heflin bond?
$4000
 
d. How much explicit tax would she have paid on the Surething Inc. bond?
$4000
 
e. What is her after-tax rate of return on the Surething Inc. bond?
6%
   
Fergie has the choice between investing in a State of New York bond at 5 percent and a
Surething Inc. bond at 8 percent. Assuming that both bonds have the same nontax
characteristics and that Fergie has a 30 percent marginal tax rate, in which bond should she invest?
 
Surething Bond
   
Fergie has the choice between investing in a State of New York bond at 5 percent and a Surething Inc. bond at 8 percent.
Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate,
what interest rate does the state of New York bond need to offer to make Fergie indifferent between investing in the two bonds?
(Do not round intermediate calculations. Round your answer to 1 decimal place.)
 
Interest rate is 5.6%
   
Given the following tax structure, what minimum tax would need to be assessed on
Shameika to make the tax progressive with respect to average tax rates?
 
Minimum Tax 3,001
   
The estate tax is based on the fair market value of the estate upon death.
 
True
   
Which of the following criteria is NOT a characteristic of a good tax system?


convenience
complexity
sufficiency
equity
   
A(n) _____________ tax is an example of a tax assessed by a state or local government.
 
income
   
The _________ ___________ tax pays the monthly retirement, survivor, and disability benefits
for qualifying individuals, whereas the _____________ tax pays for medical insurance for
individuals who are elderly or disabled. (Enter one word per blank)
 
social security; Medicare
   
Which of the following is considered a tax?
 
1% local surcharge on hotel rooms to pay for city government.
   
Which of the following is an example of a progressive tax system?
 
U.S Federal Income Tax
   
Taxes influence personal decisions such as whether to buy or rent a house.
 
true
   
The federal income tax is an example of a regressive tax system.
 
false
   
Horizontal equity means that two taxpayers with different amounts of income should pay
different amounts of tax but fairly in relation to their ability to pay.
 
false
   
Ramon, a single taxpayer with no dependents, has adjusted gross income for 2016 of $98,000
and his itemized deductions total $19,000. What taxable income will Ramon show in 2016?
 
$74,950
   
Ben, a single taxpayer with no dependents, is 32 years old. What is the minimum amount of
income that he must have to be required to file a tax return for 2016?
 
$10,350
   
When evaluating a tax system, ________ suggests that taxpayers should be able to
determine when to pay the tax, where to pay the tax, and how to determine the tax.
 
certainty
   
When evaluating a tax system, ________ suggests that the system should be
designed to facilitate the collection of tax revenues without undue hardship
on the taxpayer or the government.
Convenience
 
   
A(n) ______________ is a payment required by a government that is unrelated to any specific benefit or service
received from the government.
 
tax
   
Joan, who was divorced in 2016, had filed a joint tax return with her husband in 2015.
During 2016, she did not remarry and continued to maintain her home in which her five
dependent children lived. In the preparation of her tax return for 2016, Joan should file as:
 
Head of household
   
When evaluating a tax system, _________ considers how the tax burden should be distributed
across taxpayers.
 
Equity
   
Assessing the ________ of a tax system means determining the amount of tax revenue needed
to fund the government and ensuring that the funds are provided by the system.
 
sufficiency
   
Which of the following calculations is correct for determining the amount of tax?
 
tax base x tax rate
   
Margaret and her sister support their mother and together provide 85 percent of their
mother's support. If Margaret provides 40 percent of her mother's support:
 
Margaret may claim her mother as a dependent if her sister agrees in a multiple support agreement.
   
Margaret, age 65, and John, age 62, are married with a 23-year-old daughter who lives in their home.
They provide over half of their daughter's support and their daughter earned $4,100 this year from a part-time job.
Their daughter is not a full-time student. How many exemptions should Margaret and John claim on a joint return for 2016?
 
2
   
Lyn, age 65, and Robert, age 66, are married and support Lyn's father (no taxable income) and Robert's mother,
 who has $2,200 of gross income. If they file a joint return for 2016, how many exemptions may Lyn and Robert claim?
 
4
   
Arthur is 65 years old. He supports his father, who is 90 years old, blind, and has no income.
For 2016, how many exemptions should Arthur claim on his tax return?
 
2
   
Taxpayers who are 65 or older get the benefit of:
 
An additional amount added to their standard deduction
   
The federal individual income tax system in the United States uses a(n) _____________ tax structure.
 
Progressive
   
The _________ tax rate is the best measure of the tax burden because it is the average level
of tax on all income from taxable and nontaxable sources. The _________ tax rate measures
the average level of tax on only taxable income. The _________ tax rate indicates the rate of
tax on the next additional increment of income.
 
effective; average; marginal
   
Which of the following sentences describes the marginal tax rate?
 
The tax rate applied to the next additional increment of a taxpayer's taxable income (or deductions)
   
Blade pays tax of $5,000 on taxable income of $50,000 while Caden pays tax of $10,000 on taxable income
of $100,000. What type of tax rate structure appears to be in force?
 
Proportional
   
Which of the following taxes uses a regressive tax rate structure?
 
social security tax
   
True or false: The federal estate tax is the MOST significant tax assessed by the U.S. government
because it generates more revenue for the government than other types of federal taxes.
 
false
   
Which of the following taxes uses a proportional tax rate structure?
social security tax
federal estate tax
federal corporate tax
federal individual income tax
   
Taxpayers who are blind get the benefit of:
 
An additional amount added to their standard deduction.
   
Which of the following is not a capital asset to an individual taxpayer?
 
Inventory in the taxpayer's business
   
Jayne purchased General Motors stock 6 years ago for $20,000. In 2016, she sells the stock for $35,000.
What is her gain or loss?
 
$15,000 long-term gain
   
A sales tax is an example of a tax that uses a(n) _______________ tax rate structure when compared to its tax base.
 
Proportional
   
Melinda invests $330,000 in a City of Heflin bond that pays 4.8 percent interest.
Alternatively, Melinda could have invested the $330,000 in a bond recently issued by
Surething Inc., that pays 8 percent interest and has risk and other nontax characteristics
similar to the City of Heflin bond. Assume Melinda's marginal tax rate is 40 percent.


a. What is her after-tax rate of return for the City of Heflin bond?
b. How much explicit tax does Melinda pay on the City of Heflin bond?
c. How much implicit tax does she pay on the City of Heflin bond?
d. How much explicit tax would she have paid on the Surething Inc. bond?
e. What is her after-tax rate of return on the Surething Inc. bond?
 
a. 4.8%
b. $0
c. $10560
d. $10560
e. 4.8%
   
Chuck, a single taxpayer, earns $75,000 in taxable income and $10,000 in interest  from
an investment in City of Heflin bonds. Using the U.S. tax rate schedule
A) how much federal tax will he owe?
B) What is his average tax rate?
C) What is his effective tax rate?
D) What is his current marginal tax rate?
 
A) Chuck will owe $14,678.75 in federal income tax this year computed as follows:
$14,679 = $4,991.25 + 0.25(75,000 - $36,250)
 
B) Chuck’s average tax rate is             19.57%.
 
C) Chuck’s effective tax rate is            17.27%.
 
D) Chuck is currently in the 25% tax rate bracket. His marginal tax rate on increases in income
      up to $12,850, and deductions from income up to $38,750 is 25 percent
 
In reviewing the tax rate schedule for a single taxpayer, Chuck notes that the tax on
$75,000 is $4,991.25 plus 25 percent of the taxable income over $36,250.
What does the $4,991.25 represent?
 
The $4,991.25 represents the income tax on $36,250
   
Given the following tax structure, what minimum tax would need to be assessed
on Shameika to make the tax progressive with respect to effective tax rates?


Taxpayer Salary                       Muni-Bond Interest                Total Tax


Mihwah           $28,000                                   $28,000                                   $2,688


Shameika         $68,000                                   $39,000                                   ???
 
$5137
   
Jorge and Anita, married taxpayers, earn $150,000 in taxable income and $40,000 in interest from
an investment in City of Heflin bonds. Using the U.S. tax rate schedule for married filing jointly:
 
A) how much federal tax will they owe?
B) What is their average tax rate?
C) What is their effective tax rate?
D) What is their current marginal tax rate?
 
A) $29,465.50             (29,465.50 = 28,457.50 + 28% (150,000 - 146,400)
B) 19.64%
C) 15.51%
D) 28%
   
Arlene is single and has taxable income of $18,000. Her tax liability is currently
$1,970 She has the opportunity to earn an additional $5,000 if she accepts and
completes a special project at work.
There are no additional expenses to offset the $5,000 income.
Consequently, Arlene will have a tax liability of $2,570 if she accepts the special project.
Arlene has a marginal tax rate of _____.
 
12%
   
Given the following tax structure,


Mae $11,000               $550
Pedro $21,000            ???

a. What is the minimum tax that Pedro should pay to make the tax structure vertically equitable
     with respect to the amount of tax paid?
551
 
b. what type of tax structure is this?
Regressive
   
Which of the following is considered a tax?
 
1% local surcharge on hotel rooms to pay for city government.
   
Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest
from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule
for year 2019, what is his effective tax rate (rounded)?
 
16.52%
   
Fergie has the choice between investing in a State of New York bond at 4.1 percent
and a Surething Inc. bond at 6.8 percent. Assuming that both bonds have the same
nontax characteristics and that Fergie has a 30 percent marginal tax rate, what interest
rate does the state of New York bond need to offer to make Fergie indifferent between
 investing in the two bonds?
 
4.76%
   
Randall is single and has total income from all sources (taxable and nontaxable) of $83,000.
His taxable income is $62,000. Randall's tax liability is $9,580.
What is Randall's average tax rate?
 
15.45%

9,580 / 62,000 = 15.45%
   
Cathy purchases a new computer for $500 in a state where the sales tax rate is 5%.
The amount of sales tax that will be added to the purchase is $____.
 
$25
 
500 x 0.005 = 25