Mr. and Mrs. Lay’s taxable income is $679,000, which includes a $22,030 dividend on their investment in Rexford Mutual Fund. Mr. and Mrs. Lay’s marginal rate on ordinary income is 37 percent, and their entire Rexford dividend is subject to the Medicare contribution tax. Use Individual tax rate schedules and Tax rates for capital gains and qualified dividends. Required: Compute the Lays' total tax on this dividend if their Form 1099 from Rexford reported that the entire $22,030 was an ordinary dividend. Compute the Lays' total tax on this dividend if their Form 1099 from Rexford reported that $17,540 was an ordinary dividend and $4,490 was a capital gain distribution. Compute the Lays' total tax on this dividend if their Form 1099 from Rexford reported that $6,920 was an ordinary dividend, $10,620 was a qualified dividend distribution, and $4,490 was a capital gain distribution.

Respuesta :

Answer:

a. Compute the Lays' total tax on this dividend if their Form 1099 from Rexford reported that the entire $22,030 was an ordinary dividend.

tax liability = $22,030 x 37% = $8,151.10

b. Compute the Lays' total tax on this dividend if their Form 1099 from Rexford reported that $17,540 was an ordinary dividend and $4,490 was a capital gain distribution.

tax liability:

$17,540 x 37% = $6,489.80

$4,490 x 20% = $898

total = $7,387.80

Capital gains tax rate is 20%  if the married couple's income is $496,601 or higher.

c. Compute the Lays' total tax on this dividend if their Form 1099 from Rexford reported that $6,920 was an ordinary dividend, $10,620 was a qualified dividend distribution, and $4,490 was a capital gain distribution.

$6,920 x 37% = $2,560.40

$15,110 x 20% = $3,022

total = $5,582.40

Qualified dividends are taxed at the same rate as capital gains.

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