ACCT Tax 401 Chapter 1 - 3 (1). Tawana owns and operates a sole proprietorship a
ID: 2652047 • Letter: A
Question
ACCT Tax 401 Chapter 1 - 3
(1). Tawana owns and operates a sole proprietorship and has a 40 percent marginal tax rate. She provides her son, Jonathon, $17,500 a year for college expenses. Jonathon works as a pizza delivery person every fall, and has a marginal tax rate of 15 percent.
a.
What could Tawana do to reduce her family tax burden?
1. Employ her son in her sole proprietorship
2. Ask Jonathon to find a new job
3. Start a new enterprise
b. How much pretax income does it currently take Tawana to generate the $17,500 after taxes given to Jonathon? (Round your answer to the nearest whole dollar amount.)
What is Pretax Income?............
c. If Jonathon worked for his mother’s sole proprietorship, what salary would she have to pay him to generate $17,500 after taxes (ignoring any Social Security, Medicare, or self-employment tax issues)?(Round your answer to the nearest whole dollar amount.)
What is the Salary………
d. How much money would this strategy save? (Round your intermediate calculations and final answers to the nearest whole dollar amount.)
This strategy will save Tawana ………..? Pretax and…………? After tax
(2) Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $18,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $18,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 40 percent this year and next year, and that she can earn an after-tax rate of return of 12 percent on her investments.
(A). what is the after-tax cost if Isabel pays the $18,000 bill in January
(3). Song earns $155,000 taxable income as an interior designer and is taxed at an average rate of 30 percent (i.e., $46,500 of tax).
a. If Congress increases the income tax rate such that Song’s average tax rate increases from 30 percent to 40 percent, how much more income tax will she pay assuming that the income effect is descriptive?(Round your intermediate calculations and final answer to 2 decimal places.)
(4). Congress would like to increase tax revenues by 13.5 percent. Assume that the average taxpayer in the United States earns $64,000 and pays an average tax rate of 20 percent.
a.If the income effect is in effect for all taxpayers, what average tax rate will result in a 13.5 percent increase in tax revenues? (Round your answer to 2 decimal places.)
(5). Jorge and Anita, married taxpayers, earn $92,500 in taxable income and $65,000 in interest from an investment in City of Heflin bonds. Using the U.S. tax rate schedule for married filing jointly, how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate?
a. Federal tax $
b. Average tax rate %
e. Effective tax rate %
d. Marginal tax rate %
(6). Chuck, a single taxpayer, earns $84,500 in taxable income and $23,000 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule.) (Do not round intermediate calculations. Round your answers to 2 decimal places.)
a.
If Chuck earns an additional $56,000 of taxable income, what is his marginal tax rate on this income?
Marginal tax rate ?
b. What is his marginal rate if, instead, he had $56,000 of additional deductions?
Marginal tax rate ?
(7). Hugh has the choice between investing in a City of Heflin bond at 6.30 percent or a Surething bond at 10.25 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?
a. Interest rate ?
ACCT Tax 401 Chapter 1 - 3
(1). Tawana owns and operates a sole proprietorship and has a 40 percent marginal tax rate. She provides her son, Jonathon, $17,500 a year for college expenses. Jonathon works as a pizza delivery person every fall, and has a marginal tax rate of 15 percent.
Explanation / Answer
Ques 1) (a) 1) Employe her son in her sole proprietorship so that she can reduce tax burden from 40% to 15%. (b) To generate 17500 post tax pretax income required currently Post tax income = Pre tax income (1- Tax rate) 17500 = Pre tax (1-0.40) Pre tax income = 17500/0.6 Pre tax income = 29166.67 ( c) To give hime post tax salary 17500 she need to pay pre tax = 17500/(1-0.15) 20588.24 (d) Pre tax savings = 29166.67 - 20588.24 = 8578.431 Post tax savings = Tax savings on salary(Tax deductable) (20588.24 x 40%) 8235.294 Additional tax payable by Jonathon = (20588.24 x 15%) 3088.235 Post tax savings = 5147.059 As per guidelines provided to us we are supposed to solve only first question in case multiple questions are posted, so I have done only question no. 1 please post rest of the questions separately. Thanks.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.