# Taxation in the U S: Questions and Answers

Pages: 2 (413 words) Published: September 11, 2009
Terri Poe

H2

1.Thomas has the following tax information. What amount would Thomas report as taxable income? o gross salary \$41780
o dividend income \$80
o
o interest earnings \$225
o
o
1. Using the tax table, determine the amount of taxes for the following situations. o A head of household with taxable income of \$26210 3396
o A single person with taxable income of \$26888
3654
o A married person filing a separate return with taxable income of \$26272 3564
1. Would you prefer a fully taxable investment earning 10.7% or a tax-exempt investment earning 8.1%.  Why?  Assume a 28% tax rate.

Example 5000.00 @10.7% (1yr investment) = \$5350.00 with interest of \$350.00 with a 28% tax rate TAXES = \$98.00 on a fully taxable investment earning leaving \$5341.00 5000.00 @ 8.1% yields 40.50 of interest in 1 yr TOTAL 5040.50 remaining dollars Tax exempt So I would choose the fully taxable option to get more money. You only pay on the money you earn as interest.

2. Elaine prepares her own income tax return each year.  A tax preparer would charge her \$60 for this service.  Over a period of 10 years, how much does Elaine gain from preparing her own tax return?  Assume she can earn 3% on her savings.

\$60.00 per yr X 10 yrs = \$600.00 savings
Investment chart
1st year \$60 @3% = \$1.80 interest =\$ 61.80
2nd yr \$61.80 @3% = \$1.85 interest= \$ 63.65
3rd yr \$63.65 @ 3% = \$1.91 interest =\$65.56
4th yr \$65.56 @3%=\$1.97 interest =\$67.53
5th yr \$67.53 @3% = \$2.03 interest = \$69.56
6th yr \$69.56 @3%=\$2.09 interest = \$71.65
7th yr \$71.65 @ 3%= \$2.15 interest= \$73.80
8th yr \$73.80 @ 3%= \$2.21 interest = \$76.01
9th yr \$76.01 @ 3%=\$2.28 interest = \$78.29
10th yr \$78.29 @ 3%=\$2.35 interest = \$80.64
Her investment was \$600.00 + \$80.64 interest for ten years = return \$680.64. That is a savings of \$80.64 in...