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# Comprehensive Income and Tax Liability

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A person has earnings of \$50,000 this year. The market value value of her condominium that she purchased this year for \$100,000 has increased by 5 percent. Assuming that the rate of inflation is 3 percent, and that she has neither capital losses nor earnings, and receives no transfers, calculate her comprehensive income. If she were subject to a comprehensive income tax at a 20 percent flat tax rate, what would her tax liability be for the year?

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#### Solution Preview

Total Earnings = 50,000 + 0.5*100,000 = 55,000
Tax Liability = .2*55,000 = 11,000

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