Dick DeWolf and his wife have a total taxable income of $60,000 this year and file a joint federal income tax return. If inflation continues for the next 20 years at a 5% annual rate, Dick wonders what their taxable income must be to provide the same purchasing power after taxes. Assuming the federal income tax rate table is unchanged, what must their taxable income be 20 years from now?

Dick DeWolf and his wife have a total taxable income of $60,000 this year and file a joint federal income tax return. If inflation continues for the next 20 years at a 5% annual rate, Dick wonders what their taxable income must be to provide the same purchasing power after taxes. Assuming the federal income tax rate table is unchanged, what must their taxable income be 20 years from now?

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter12: Alternative Minimum Tax

Section: Chapter Questions

Problem 30P: Lisa records nonrefundable Federal income tax credits of 65,000 for the year. Her regular income tax...

See similar textbooks

Similar questions

Lisa records nonrefundable Federal income tax credits of 65,000 for the year. Her regular income tax liability before credits is 190,000, and her TMT is 150,000. a. What is Lisas AMT? b. What is Lisas regular income tax liability after credits?
Leroy and Amanda are married and have three dependent children. During the current year, they have the following income and expenses: Salaries 120,000 Interest income 45,000 Royalty income 27,000 Deductions for AGI 3,000 Deductions from AGI 9,000 a. What is Leroy and Amandas current year taxable income and income tax liability? b. Leroy and Amanda would like to lower their income tax. How much income tax will they save if they validly transfer 5,000 of the interest income to each of their children? Assume that the children have no other income and that they are entitled to a 1,050 standard deduction.
How much taxable income should each of the following taxpayers report? a. Kimo builds custom surfboards. During the current year, his total revenues are 90,000, and he incurs 30,000 in expenses. Included in the 30,000 is a 10,000 payment to Kimos five-year-old son for services as an assistant. b. Manu gives hula lessons at a local bar. During the current year, she receives 9,000 in salary and 8,000 in tips. In addition, she engages in illegal behavior, for which she receives 10,000.
On June 30, 2019, Kelly sold property for 240,000 cash and a 960,000 note due on September 30, 2020. The note will also pay 6% interest, which is slightly higher than the Federal rate. Kellys cost of the property was 400,000. She is concerned that Congress may increase the tax rate that will apply when the note is collected. Kellys after-tax rate of return on investments is 6%. a. What can Kelly do to avoid the expected higher tax rate? b. Assuming that Kellys marginal combined Federal and state tax rate is 25% in 2019, how much would the tax rates need to increase to make the option identified in part (a) advisable?
In each of the following problems, identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify. Ariel has worked for Sander Corporation for 30 years. Sander has a pension plan in which it matches employee contributions by up to 5 percent of the employees salary. Ariel, who is single, retires during the current year when she is 66 years old. Her pension plan contains payments and earnings of 300,000, half of which are attributable to payments made by Ariel and half attributable to payments made by Sander. Under the plan, Ariel is to receive 2,000 per month until she dies.
Floyd, a cash basis taxpayer, has received an offer to purchase his land. The cash basis buyer will pay him either 100,000 at closing or 50,000 at closing and 56,000 two years after the date of closing. If Floyd recognizes the entire gain in the current year, his marginal tax rate will be 25% (combined Federal and state rates). However, if he spreads the gain over the two years, his combined marginal tax rate on the gain will be only 20%. Floyd does not consider the buyer a credit risk, and he understands that shifting the gain to next year with an installment sale will save taxes. Still, he realizes that the deferred payment will, in effect, earn only 6,000 for waiting two years for the other 50,000. Floyd believes he can earn a 10% before-tax rate of return on his after-tax cash. Floyds adjusted basis for the land is 25,000, the buyer is also a cash basis taxpayer, and the short-term Federal rate is 4%. Floyd has asked you to evaluate the two alternatives on an after-tax basis.