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##### tax problems - questin and answer,.,. ch 1

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Question;Problems;(1) [LO3] 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, how much;federal tax will he owe? What is his;average tax rate? What is his effective;tax rate? What is his current marginal;tax rate?;(2);[LO3] Using the facts in the;previous problem, if Chuck earns an additional $40,000 of taxable income, what;is his marginal tax rate on this income?;What is his marginal rate if, instead, he had $40,000 of additional;deductions?;[LO3] In reviewing the tax rate schedule for a single taxpayer, Chuck notes;that the tax on $75,000 is $5,081.25 plus 25 percent of the taxable income over;$36,900. What does the $5,081.25;represent?;[LO3] Campbell, a single taxpayer, earns $400,000 in taxable income and $2,000;in interest from an investment in State of New York bonds. Using the U.S. tax rate schedule, how much;federal tax will she owe? What is her;average tax rate? What is her effective;tax rate? What is her current marginal;tax rate?;(3);[LO3] Using the facts in the;previous problem, if Campbell earns an additional $15,000 of taxable income;what is her marginal tax rate on this income?;What is her marginal rate if, instead, she had $15,000 of additional;deductions?;(4);[LO3] 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, 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?;[LO3] Using the facts in the previous problem, if Jorge and Anita earn an;additional $100,000 of taxable income, what is their marginal tax rate on this;income? What is their marginal rate if;instead, they reported an additional $100,000 in deductions?;(5);[LO3] In reviewing the tax rate;schedule for married filing jointly, Jorge and Anita note that the tax on;$150,000 is $28,925 plus 28 percent of the taxable income over $148,850. What does the $28,925 represent?;[LO3] Scot and Vidia, married taxpayers, earn $240,000 in taxable income and;$5,000 in interest from an investment in City of Tampa 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?;(6);[LO3] Using the facts in the previous problem;if Scot and Vidia earn an additional $70,000 of taxable income, what is their;marginal tax rate on this income? How;would your answer differ if they, instead, had $70,000 of additional;deductions?;[LO3, LO4] 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 with similar risk and other nontax characteristics;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?;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?;\;(7);[LO3,LO4 PLANNING] Hugh has the choice between;investing in a City of Heflin bond at 6 percent or a Surething 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?;(8);[LO3, LO4 PLANNING] Using the;facts in the previous problem, what interest rate does Surething, Inc., need to;offer to make Hugh indifferent between investing in the two bonds?;(9);[LO3, LO4 PLANNING] Fergie has;the choice between investing in a State of New York bond at 5 percent and a;Surething 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?;(10);[LO3, LO4 PLANNING] Using the;facts in the previous problem, what interest rate does the state of New York;need to offer to make Fergie indifferent between investing in the two bonds?

Paper#38131 | Written in 18-Jul-2015

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