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

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