4 4 points Item 4 Item 4 4 points Item Skipped TPC 17-02 [LO 17-2] Mr. and Mrs.

Question

4

4 points

Item 4

Item 4 4 points Item Skipped

TPC 17-02 [LO 17-2]

Mr. and Mrs. TB are going through an amicable divorce. Mrs. TB, who is a full-time homemaker, will have custody of their two children, ages 2 and 4. She suggested that Mr. TB pay $4,000 child support each month. He countered by offering to pay $1,600 child support and $3,000 alimony each month if he can claim their two children as dependents. In either case, Mrs. TB will qualify as a head of household. Mr. TB’s taxable income averages $150,000, putting him in the 28 percent marginal tax bracket. Use Individual tax rate schedules and Standard deduction table.

Compute Mr. TB’s annual after-tax cost and Mrs. TB’s annual after-tax cash flow if she accepts his counterproposal.

Individual Tax Rate Schedules Married Filing Jointly and Surviving Spouse If taxable income is: Not over $18,650 Over $18,650 but not over $75,900 Over $75,900 but not over $153,100 Over $153,100 but not over $233,350 $29,752.50 + 28% of excess over $153,100 Over $233,350 but not over $416,700 $52,222.50 + 33% of excess over $233,350 Over $416,700 but not over $470,700 $112,728 + 35% of excess over $416,700 Over $470,700 Married Filing Separately If taxable income is: Not over $9,325 Over $9,325 but not over $37,950 Over $37,950 but not over $76,550 Over $76,550 but not over $116,675 Over $116,675 but not over $208,350 $26,111.25 + 33% of excess over $116,675 Over $208,350 but not over $235,350 $56,364 + 35% of excess over $208,350 Over $235,350 Heads of Household If taxable income is: Not over $13,350 Over $13,350 but not over $50,800 Over $50,800 but not over $131,200 $6,952.50 + 25% of excess over $50,800 Over $131,200 but not over $212,500 $27,052.50 + 28% of excess over $131,200 Over $212,500 but not over $416,700 $49,816.50 + 33% of excess over $212,500 Over $416,700 but not over $444,550 $117,202.50 + 35% of excess over $416,700 Over $444,550 Single If taxable income is: Not over $9,325 Over $9,325 but not over $37,950 Over $37,950 but not over $91,900 Over $91,900 but not over $191,650 Over $191,650 but not over $416,700 $46,643.75 33% of excess over $191,650 Over $416,700 but not over $418,400 $120,910.25 + 35% of excess over $416,700 Over $418,400 The tax is: 10% of taxable income $1,865.00 + 15% of excess over $18,650 $10,452.50 + 25% of excess over $75,900 $131,628 + 39.6% of excess over $470,700 The tax is: 10% of taxable income $932.50 + 15% of excess over $9,325 $5,226.25 + 25% of excess over $37,950 $14,876.25 + 28% of excess over $76,550 $65,814 39.6% of excess over $235,350 The tax is: 10% of taxable income $1,335.00 + 15% of excess over $13,350 $126,950.00 + 39.6% of excess over $444,550 The tax is: 10% of taxable income $932.50 + 15% of excess over $9,325 $5,226.25 + 25% of excess over $37,950 $18,713.75 + 28% of excess over $91,900 $121,505.25 + 39.6% of excess over $418,400

Explanation / Answer

Mr.TB will receive following tax deductions:

Dependancy exemption for two childern= 4050*2= 9100

Alimony deduction= 3000

Total deductions= 9100+3000= 12100

Tax benefit= 12100*28%= 3388

After tax cost= 12100-3388= 8712

Since Mrs. TB is not having any income, sole receipt of taxable Alimony of 3000 which is under her exemption limits in either case will not impact her tax liability and hence cash flows

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.