I I need the steps to solve the problems

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Answered Same DayNov 04, 2021

Answer To: I I need the steps to solve the problems

Bhavani answered on Nov 04 2021
158 Votes
Tax answers
6) Net short term capital gain will be taxed at ordinary income tax rates but net long term capital tax will be taxed at preferential tax rates, So given statement is proved as False.
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7) Income tax liability:
Salary
= $68,100
Less: Adjustments to income =0
=Adjusted Gross income = $68100
Less: Standard deductions = $18350
=Taxable income =$49750

Ordinary tax liability for taxable income for the year 2019 =$49750
$13850*10/100 =$1385
$49750 - $13850=$35900 * 12/ 100 = $4308
Ordinary tax liability =$1385 + $4308 =$5693
Qualified dividends =$8000 * 15/100=$1200
Total tax liability =$5693 +$1200 = $6893
Working notes for qualified dividends:
First $3000 will be taxed at 0% as long term capital gain, so $11,000 - $3000
=$8000 will be taxed.
Qualified dividend will be tax 15% for taxable income more than $38600.
If tax payer taxable income less than $38600, qualified dividends not taxable.
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8) Tax payer self employment tax liability
Maximum earning for social security tax for 2019 will be $132900
Tax payer maximum earning will be =Salary +net profit
=$101,000+ $40,000
=$141,000
Excess of maximum earnings = $141,000 - $132,900
=$8,100
Adjust net profit for social security tax= $40,000 - $8100
=$31900
Social security tax liability= Adjust net profit for Social Security tax* Social security tax
= $31900 * 12.4/100=$3955.60
There is no earning limitation for Medicare tax, full net profit will be used
Adjust Net profit for Medicare tax liability= Net profit * Medicare tax
=$40,000 * 92.35/100
=$36940

Medicare tax= Adjust Net profit for Medicare tax * Medicare tax
=$36940 * 2.9%
=$1071.26
Self employment tax liability = Social security tax liability + Medicare tax liability
= $3955.60 + $1071.26
= $5026.86

Working Notes for self employment tax:
Self employment tax is sum of Social security tax + Medicare tax
Employer and employee will contribute for social security tax 6.2 %+6.2% =12.4%
Employer and employee will contribute for Medicare tax 1.45+1.45 = 2.9%
Employment tax is $12.4%+2.9% = 15.3%
9) Interest received = Maturity value * interest rate
$50,000 * 3/100=$1500.
Bond Discount = Maturity value - Bond purchased amount
$50,000 - $45,000 = $5000
Discounts on bonds receivable per period = Bonds discount / Number of period.
$5000 / 10 period =$500
Interest ...
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