QUESTION 2

1.Jack and Frank are considering purchasing a condo for $400,000 to live in near Vienna Metro. Although they have sufficient income for a 15% down payment, they would prefer to make only an 8% down payment. Their lender quotes them a 3.5% interest rate for a 15% down payment and a 5% interest rate for an 8% down payment. This year, they expect to have taxable income of $175,000. Mortgage interest paid deductions are tax deductible and Jack and Frank file married filing jointly.

1. What is the difference in tax deductions for Jack and Frank under the different down payment scenarios?(Note: although home loans are commonly amortized with interest and loan payments over 30 yearsor 360 payments, assume that the lender allows Wanda and Alex to make interest only payments and no principal payments in the first year.)

2. What is the difference in after-tax cash flow savings of each option?

QUESTION 3

Jack and Frank are considering purchasing a condo for $400,000 to live in near Vienna Metro. Although they have sufficient income for a 15% down payment, they would prefer to make only an 8% down payment. Their lender quotes them a 3.5% interest rate for a 15% down payment and a 5% interest rate for an 8% down payment. This year, they expect to have taxable income of $175,000. Mortgage interest paid deductions are tax deductible and Jack and Frank file married filing jointly.

If you were Franks accountant what decision would you recommend? (Hint: consider after tax cost of the loan or cash flow in the client's bank account)

QUESTION 41.

This year, Joyce was promoted and received a 15,000 increase in salary. Last year, her taxable income was $82,250. Joyce is single. What is the marginal tax rate on the salary increase?

QUESTION 51.

Assume Joyce makes $120,000 in taxable Income in 2020. What is her average tax rate on her income? (Average Tax Rate= Total Tax/Taxable Income)

QUESTION 61.

Assume Joyce makes $120,000 in taxable Income in 2020. Is her average tax rate higher than her marginal tax rate on her income?

QUESTION 71.

Assume Joyce makes $120,000 in taxable Income in 2020.

What type of tax rate structure applies to her income?

QUESTION 81.

This year, Jorge (MFJ) inherits $3,000,000 and invests in City of Fairfax bonds at 3% interest. Last year, his Salary last year was $500,000. His salary had not changed from the prior tax year.

What is the change in Jorge's average tax rate on his income?

QUESTION 91.

This year, Jorge (MFJ) inherits $3,000,000 and invests in City of Fairfax bonds at 3% interest. Last year, his Salary last year was $500,000. His salary had not changed from the prior tax year.

What is his Average tax rate if he decided to invest the 3,000,000 in corporate bonds instead? The corporate bonds had an annual yield of 8%.

QUESTION 101.

Sheldon stated to his friend Raj that taxes are useless. Provide 2 reasons why taxes are not useless.