Dividends and Capital Gains. Calculate the total tax (FICA adn income taxes) owed by each individual in the following pairs. Compare their overall tax rates. Assume that all the individuals are single and take the standard deduction. Use the tax rates in Table 4.9 and the special rates for dividends adn capital gains given in the text. Pierre earned $120,000 in wages. Katarina earned $120,000, all from dividends adn long-term capital gains. 2017 Marginal Tax Rates, Standard Deductions,and Exemptions*TABLE 4.9Married FilingJointlyMarried FilingSeparatelyHead ofTax Rate**SingleHouseholdup to $13,350up to $50,80010%up to $9325up to $18,650up to $932515%up to $37,950up to $75,900up to $37,95025%up to $91,900up to $153,100up to $76,550up to $131,200up to $212,500up to $416,70028%up to $191,650up to $233,350up to $116,67533%up to $416,700up to $416,700up to $208,350up to $470,700above $470,70035%up to $418,400up to $235,350up to $444,55039.6%above $418,400above $235,350above $444,550Standarddeduction$6350$12,700$6350$9350Exemption(per person)$4050$4050$4050$4050This table ignores (i) exemption and deduction phase-outs that apply to high-income taxpayers; (i) the alterna-tive minimum tax (AMT) that affects many middle- and high-income taxpayers; (ii) potential changes in tax lawmade after this text was printed that may have changed the values given in this table for 2017.* Each higher marginal rate begins where the prior one leaves off. For example, for a single person, the 15%marginal rate affects income starting at $9325, which is where the 10% rate leaves off, and continuing up to$37,950.

Pierre's income from wages: $120,000 FICA taxes are applicable upto the limit of income of $127,200.…

Answered: Dividends and Capital Gains. Calculate…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Dividends and Capital Gains. Calculate the total tax (FICA adn income taxes) owed by each individual in the following pairs. Compare their overall tax rates. Assume that all the individuals are single and take the standard deduction. Use the tax rates in Table 4.9 and the special rates for dividends adn capital gains given in the text.

Pierre earned $120,000 in wages. Katarina earned $120,000, all from dividends adn long-term capital gains.

2017 Marginal Tax Rates, Standard Deductions,
and Exemptions*
TABLE 4.9
Married Filing
Jointly
Married Filing
Separately
Head of
Tax Rate**
Single
Household
up to $13,350
up to $50,800
10%
up to $9325
up to $18,650
up to $9325
15%
up to $37,950
up to $75,900
up to $37,950
25%
up to $91,900
up to $153,100
up to $76,550
up to $131,200
up to $212,500
up to $416,700
28%
up to $191,650
up to $233,350
up to $116,675
33%
up to $416,700
up to $416,700
up to $208,350
up to $470,700
above $470,700
35%
up to $418,400
up to $235,350
up to $444,550
39.6%
above $418,400
above $235,350
above $444,550
Standard
deduction
$6350
$12,700
$6350
$9350
Exemption
(per person)
$4050
$4050
$4050
$4050
This table ignores (i) exemption and deduction phase-outs that apply to high-income taxpayers; (i) the alterna-
tive minimum tax (AMT) that affects many middle- and high-income taxpayers; (ii) potential changes in tax law
made after this text was printed that may have changed the values given in this table for 2017.
* Each higher marginal rate begins where the prior one leaves off. For example, for a single person, the 15%
marginal rate affects income starting at $9325, which is where the 10% rate leaves off, and continuing up to
$37,950.

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