Mike and Julie Bedard are a working couple. They will file a joint income tax return. This year they have the following taxable income:

1. $

128,000 from salary and wages (ordinary income).

2. $

1,000 in interest income.

3. $

2,000 in dividend income.

4. $

5,000 in profit from sale of a stock they purchased two years ago.

5. $

5,000 in profit from a stock they purchased this year and sold this year.

Use the federal income tax rates given in Table 1.2, to work this problem.

a. How much will Mike and Julie pay in federal income taxes on 2 above?

b. How much will Mike and Julie pay in federal income taxes on 3 above? (Note: Remember that dividend income is taxed differently than ordinary income.)

c. How much will Mike and Julie pay in federal income taxes on 4 above?

d. How much will Mike and Julie pay in federal income taxes on 5 above?

Taxable Income

Tax Rates

Joint Returns

10%

$0 to $19,750

12%

$19,751 to $80,250

22%

$80,251 to $171,050

24%

$171,051 to $326,600

32%

$326,601 to $414,700

35%

$414,701 to $622,050

37%

Over $622,050