Chapter 1 – An Introduction to Tax

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LO 3:1.Chuck, a single taxpayer, earns $75,000 in taxable income and $10,000 in interest from an investment in City of Heflin bonds. Usingthe 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?

2.Using the facts in the previous problem, if Chuck earns an additional$40,000 of taxable income, a.What is his marginal tax rate on this income? b.What is his marginal rate if, instead, he had $40,000 of additionaldeductions?

3.In reviewing the tax rate schedule for a single taxpayer, Chuck notes that the tax on $75,000 is $5,183.75 plus 25 percent of the taxable income over $37,650. What does the $5,183.75 represent?

4.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.Using the U.S. tax rate schedule, how much federal tax will she owe? b.What is her average tax rate? c.What is her effective tax rate? d.What is her current marginal tax rate?

5.Using the facts in the previous problem, a.If Campbell earns an additional $15,000 of taxable income, what is her marginal tax rate on this income? b.What is her marginal rate if, instead, she had $15,000 of additional deductions?

6.Jorge and Anita, married taxpayers, earn $150,000 in taxable income and $40,000 in interest from an investment in City of Heflin bonds. a.Using the U.S. tax rate schedule for married filing jointly, 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?