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# Various Tax Questions

1. If Susie earns \$750,000 in taxable income and files as head of household for year 2011, what is Susie's average tax rate (rounded)?
31.52%
30.98%
35.00%
31.98%
28.00%

2. If Julius has a 30% tax rate and a 10% after-tax rate of return, a \$40,000 tax deduction in two years will save how much tax in today's dollars (rounded)?
\$40,000
\$9,912
\$33,040
\$12,000
None of the above

3. George purchased a life annuity for \$3,200 that will provide him \$80 monthly payments for as long as he lives. Based on IRS tables, George's life expectancy is 100 months. How much of the first \$80 payment will George include in his gross income?
\$80
\$72
\$48
\$32
None of the above

4. This year Norma paid \$1,200 of real estate taxes on her personal residence. Norma's other itemized deductions only amount to \$3,100. Which of the following is a true statement if Norma files single with one personal exemption?
Norma can deduct 4,300 for AGI.
Norma can deduct \$1,200 even if her standard deduction is \$5,700.
Norma should deduct \$4,300 even if her standard deduction is \$5,700.
Norma can deduct \$3,100 even if her standard deduction is \$5,700.
Norma must itemize her deductions in order to claim the deduction for \$4,300.

#### Solution Preview

Please see the attached Excel 97-2003 spreadsheet.

1. If Susie earns \$750,000 in taxable income and files as head of household for year 2011, what is Susie's average tax rate (rounded)?
31.52%
30.98%
35.00%
31.98%
28.00%

Income Income in Tax
Range Range Rate Due
\$0-\$12,150 \$12,150 10% \$1,215
\$12,150-\$46,250 34,100 15% 5,115
\$46,250-\$119,400 73,150 25% 18,288
\$119,400-\$193,350 73,950 28% 20,706
\$193,350-\$379,150 185,800 33% 61,314
Over \$379,150 370,850 35% 129,798
\$750,000 \$236,435 ...

#### Solution Summary

This solution discusses numerous issues.

\$2.19