Song earns $150,000 taxable income as an interior designer and is taxed at an average rate of 20 percent (i.e., $30,000 of tax). Answer the questions below assuming that Congress increases the income tax rate such that Song's average tax rate increases from 20 percent to 25 percent. Required: a. What will happen to the government's tax revenues if Song chooses to spend more time pursuing her other passions besides work in response to the tax rate change and therefore earns only $112,500 in taxable income? b. What is the term that describes this type of reaction to a tax rate increase? c. What types of taxpayers are likely to respond in this manner? Complete this question by entering your answers in the tabs below. Required A Required B Required C What types of taxpayers are likely to respond in this manner? Type of taxpayers Taxpayers with less disposable income Taxpayers with more disposable income dc

Song earns $150,000 taxable income as an interior designer and is taxed at an average rate of 20 percent (i.e., $30,000 of tax). Answer the questions below assuming that Congress increases the income tax rate such that Song's average tax rate increases from 20 percent to 25 percent. Required: a. What will happen to the government's tax revenues if Song chooses to spend more time pursuing her other passions besides work in response to the tax rate change and therefore earns only $112,500 in taxable income? b. What is the term that describes this type of reaction to a tax rate increase? c. What types of taxpayers are likely to respond in this manner? Complete this question by entering your answers in the tabs below. Required A Required B Required C What types of taxpayers are likely to respond in this manner? Type of taxpayers Taxpayers with less disposable income Taxpayers with more disposable income dc

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter16: Accounting Periods And Methods

Section: Chapter Questions

Problem 37P

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Sheila, a single taxpayer, is a retired computer executive with a taxable income of 100,000 in the current year. She receives 30,000 per year in tax-exempt municipal bond interest. Adam and Tanya are married and have no children. Adam and Tanyas 100,000 taxable income is comprised solely of wages they earn from their jobs. Calculate and compare the amount of tax Sheila pays with Adam and Tanyas tax. How well does the ability-to-pay concept work in this situation?
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.
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.
Bonnie is married and has one child. She owns Bonnies Rib Joint, which produces a taxable income of approximately 120,000 per year. a. Assume that Bonnies taxable income is 40,000 without considering the income from the rib joint. How much tax will she pay on the 120,000 of income from the rib joint? b. You work for the firm that prepares Bonnies tax return. Bonnie has asked the partner for whom you work to advise her on how she might lower her taxes. The partner has assigned you this task. Draft a memorandum to the partner that contains at least two options Bonnie could use to lower her taxes. For each option, explain the calculations that support the tax savings from your recommendation.