expect to pay $14,000 tithing and $8,0 taxes for the next few years (these are their only itemized deductions). How much would bunching save them over the course of two years if their marginal tax rate is 22% ? (The standard deduction for a married filing jointly taxpayer is $24,000.)

expect to pay $14,000 tithing and $8,0 taxes for the next few years (these are their only itemized deductions). How much would bunching save them over the course of two years if their marginal tax rate is 22% ? (The standard deduction for a married filing jointly taxpayer is $24,000.)

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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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

The Roosevelt's are financially savvy and want to take advantage of the principle of bunching. Assume
for this problem, that the Roosevelts expect to pay $14,000 in tithing and $8,000 in state and local
taxes for the next few years (these are their only itemized deductions). How much would bunching
save them over the course of two years if their marginal tax rate is 22%? (The standard deduction for
a married filing jointly taxpayer is $24,000.)
$12,000
$4,840
$3,080
$3,542
$2,640
O None of the Above

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