PRINCIPLES OF TAXATION F/BUS.+INVEST.
22nd Edition
ISBN: 9781259917097
Author: Jones
Publisher: MCG
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Chapter 3, Problem 1IRP
To determine
Identify the tax issues and state the issues in the form of question.
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"Mr. and Mrs. Jerald own a dry cleaning business that generates $125,000 taxable income each year. For the past few years, the couple’s federal tax rate on this income has been 32 percent. Congress recently increased the tax rate for next year to 40 percent.
Based on a static forecast, how much additional revenue will the federal government collect from Mr. and Mrs. Jerald next year?
How much additional revenue will the government collect if Mr. and Mrs. Jerald respond to the rate increase by working harder and earning $140,000 next year?
How much additional revenue will the government collect if Mr. and Mrs. Jerald respond to the rate increase by working less and earning only $110,000 next year?
"
Peter's gross income is $80,000 a year, and Wendy earns $100,000 a year. They put $3,000
each into an IRA. They are a married couple and have two children, so that they can have a child
tax credit $2,000 per child. Peter and Wendy decided to file taxes jointly, and this year standard
deduction for married taxpayers is $24,400.
a. How much is the gross income?
b. How much is the adjusted gross income (AGI)?
c. How much is the taxable income?
d. How much do they have to pay in taxes? (Total tax payment)
e. Suppose that the government withheld $16,000 from Peter's earnings and $20,000 from
Wendy's. What is the final payment (refund) due?
Marginal tax rate
if married, filling jointly
37
35
32
24
22
12
10
19,400 78,950
168,400
321,450
408,200
612,350
Taxable Income
|| |
Isabel, a calendar year tax payer, uses the cash method of accounting for her soul proprietor ship. In late December she received a $60,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $60,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an after-tax rate of return of 8 percent on her investments. What is the after-tax cost if Isabel pays the $60,000 bill in January?
Chapter 3 Solutions
PRINCIPLES OF TAXATION F/BUS.+INVEST.
Ch. 3 - Does the NPV of future cash flows increase or...Ch. 3 - Explain the relationship between the degree of...Ch. 3 - Does the after-tax cost of a deductible expense...Ch. 3 - Prob. 4QPDCh. 3 - Prob. 5QPDCh. 3 - Prob. 6QPDCh. 3 - Prob. 7QPDCh. 3 - Which type of tax law provision should be more...Ch. 3 - In the U.S. system of criminal justice, a person...Ch. 3 - Identify two reasons why a firms actual marginal...
Ch. 3 - Prob. 11QPDCh. 3 - Prob. 12QPDCh. 3 - Prob. 1APCh. 3 - Prob. 2APCh. 3 - Prob. 3APCh. 3 - Use a 5 percent discount rate to compute the NPV...Ch. 3 - Consider the following opportunities: Opportunity...Ch. 3 - Prob. 6APCh. 3 - Refer to the income tax rate structure in the...Ch. 3 - Prob. 8APCh. 3 - Company N will receive 100,000 of taxable revenue...Ch. 3 - Prob. 10APCh. 3 - Investor B has 100,000 in an investment paying 9...Ch. 3 - Firm E must choose between two alternative...Ch. 3 - Company J must choose between two alternate...Ch. 3 - Firm Q is about to engage in a transaction with...Ch. 3 - Corporation ABC invested in a project that will...Ch. 3 - Prob. 16APCh. 3 - Investor W has the opportunity to invest 500,000...Ch. 3 - Prob. 18APCh. 3 - Prob. 19APCh. 3 - Prob. 20APCh. 3 - Prob. 21APCh. 3 - Prob. 1IRPCh. 3 - Firm V must choose between two alternative...Ch. 3 - Prob. 3IRPCh. 3 - Refer to the facts in problem 3. Company WB is...Ch. 3 - Prob. 5IRPCh. 3 - Prob. 6IRPCh. 3 - Prob. 7IRPCh. 3 - Prob. 8IRPCh. 3 - Prob. 9IRPCh. 3 - Prob. 1TPCCh. 3 - Firm D is considering investing 400,000 cash in a...
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