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.

$121,000

from salary and wages (ordinary income).

2.

$3,000

in interest income.

3.

$2,000

in dividend income.

4.

$3,000

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,

(at the bottom)

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 RatesJoint Returns

10%$0 to $19,750

$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