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.