Please show me steps on how to solve these problems!..
1. Isabel, a calendar-year taxpayer, uses the cash method ofaccounting for her sole proprietorship. In late December shereceived a $26,000 bill from her accountant for consulting servicesrelated to her small business. Isabel can pay the $26,000 billanytime before January 30 of next year without penalty. Assume hermarginal tax rate is 40 percent this year and next year, and thatshe can earn an after-tax rate of return of 10 percent on herinvestments.
1-a. What is the after-tax cost if Isabel pays the $26,000 bill inJanuary?
(PV of single payment at various ARR: [0%- 1year: 0.909], [10%-2year: 0.826])
2. Daniel is considering selling two stocks that have not faredwell over recent years. A friend recently informed Daniel that oneof his stocks has a special designation, which allows him to treata loss up to $30,000 on this stock as an ordinary loss rather thanthe typical capital loss. Daniel figures that he has a loss of$36,000 on each stock. If Daniel%u2019s marginal tax rate is 35percent and he has $72,000 of other capital gains (taxed at 15percent), what is the tax savings from the special taxtreatment?
3. Matteo, who is single and has no dependents, was planning onspending the weekend repairing his car. On Friday, Matteo%u2019semployer called and offered him $200 in overtime pay if he wouldagree to work over the weekend. Matteo could get his car repairedover the weekend at Autofix for $148. If Matteo works over theweekend, he will have to pay the $148 to have his car repaired, buthe will earn $200. Assume Matteo pays tax at a flat 15 percentrate. (Do notround intermediate calculations. Round your answers to 2 decimalplaces.)
3-a. Considering monetary considerations only, should Matteo workor repair the car if the $148 he must pay to have his car fixed isnot deductible? work or repair?
3-b. Given the answerin a-1 above, by how much is Matteo better or worse off?
3-c. Considering monetaryconsiderations only, should Matteo work or repair the car if the$148 he must pay to have his car fixed is deductible for AGI? workor repair?
3-d. Given the answer in b-1 above, byhow much is Matteo better or worse off?
4. Marc and Michelle are married and earned salariesthis year of $64,000 and $12,000, respectively. In addition totheir salaries, they received interest of $350 from municipal bondsand $500 from corporate bonds. Marc and Michelle also paid $2,500of qualifying moving expenses, and Marc paid alimony to a priorspouse in the amount of $1,500. Marc and Michelle have a10-year-old son, Matthew, who lived with them throughout the entireyear. Thus, Marc and Michelle are allowed to claim a $1,000 childtax credit for Matthew. Marc and Michelle paid $6,000 ofexpenditures that qualify as itemized deductions and they had atotal of $5,500 in federal income taxes withheld from theirpaychecks during the course of the year.
4-a. What is Marc and Michelle%u2019sgross income?
4-b.What is Marc andMichelle%u2019s adjusted gross income?
4-c.What is the totalamount of Marc and Michelle%u2019s deductions from AGI?
4-d.What is Marc andMichelle%u2019s taxable income?
4-e.What is Marc andMichelle%u2019s taxes payable or refund due for the year?(Round your answer to two decimal places.)
Please show me steps on how to solve these problems!..
1. Isabel, a calendar-year taxpayer, uses the cash method ofaccounting for her sole proprietorship. In late December shereceived a $26,000 bill from her accountant for consulting servicesrelated to her small business. Isabel can pay the $26,000 billanytime before January 30 of next year without penalty. Assume hermarginal tax rate is 40 percent this year and next year, and thatshe can earn an after-tax rate of return of 10 percent on herinvestments.
1-a. What is the after-tax cost if Isabel pays the $26,000 bill inJanuary?
(PV of single payment at various ARR: [0%- 1year: 0.909], [10%-2year: 0.826])
2. Daniel is considering selling two stocks that have not faredwell over recent years. A friend recently informed Daniel that oneof his stocks has a special designation, which allows him to treata loss up to $30,000 on this stock as an ordinary loss rather thanthe typical capital loss. Daniel figures that he has a loss of$36,000 on each stock. If Daniel%u2019s marginal tax rate is 35percent and he has $72,000 of other capital gains (taxed at 15percent), what is the tax savings from the special taxtreatment?
3. Matteo, who is single and has no dependents, was planning onspending the weekend repairing his car. On Friday, Matteo%u2019semployer called and offered him $200 in overtime pay if he wouldagree to work over the weekend. Matteo could get his car repairedover the weekend at Autofix for $148. If Matteo works over theweekend, he will have to pay the $148 to have his car repaired, buthe will earn $200. Assume Matteo pays tax at a flat 15 percentrate. (Do notround intermediate calculations. Round your answers to 2 decimalplaces.)
3-a. Considering monetary considerations only, should Matteo workor repair the car if the $148 he must pay to have his car fixed isnot deductible? work or repair?
3-b. Given the answerin a-1 above, by how much is Matteo better or worse off?
3-c. Considering monetaryconsiderations only, should Matteo work or repair the car if the$148 he must pay to have his car fixed is deductible for AGI? workor repair?
3-d. Given the answer in b-1 above, byhow much is Matteo better or worse off?
4. Marc and Michelle are married and earned salariesthis year of $64,000 and $12,000, respectively. In addition totheir salaries, they received interest of $350 from municipal bondsand $500 from corporate bonds. Marc and Michelle also paid $2,500of qualifying moving expenses, and Marc paid alimony to a priorspouse in the amount of $1,500. Marc and Michelle have a10-year-old son, Matthew, who lived with them throughout the entireyear. Thus, Marc and Michelle are allowed to claim a $1,000 childtax credit for Matthew. Marc and Michelle paid $6,000 ofexpenditures that qualify as itemized deductions and they had atotal of $5,500 in federal income taxes withheld from theirpaychecks during the course of the year.
4-a. What is Marc and Michelle%u2019sgross income?
4-b.What is Marc andMichelle%u2019s adjusted gross income?
4-c.What is the totalamount of Marc and Michelle%u2019s deductions from AGI?
4-d.What is Marc andMichelle%u2019s taxable income?
4-e.What is Marc andMichelle%u2019s taxes payable or refund due for the year?(Round your answer to two decimal places.)
