91Ó°ÊÓ

Computing Taxable Income. Thomas Franklin arrived at the following tax information: Gross salary, \(\$ 46,910\) Interest earnings, \(\$ 225\) Dividend income, \(\$ 80\) One personal exemption, \(\$ 3,650\) Itemized deductions, \(\$ 7,820\) Adjustments to income, \(\$ 1,150\) What amount would Thomas report as taxable income? (Obj. 2)

Calculating Average Tax Rate. What would be the average tax rate for a person who paid taxes of \(\$ 4,864.14\) on a taxable income of \(\$ 39,870 ?(\text { Obj. } 2)\)

Indexing Exemptions for Inflation. Each year, the Internal Revenue Service adjusts the value of an exemption based on inflation (and rounded to the nearest \(\$ 50\) ). In a recent year, if the exemption was worth \(\$ 3,100\) and inflation was 4.7 percent, what would be the amount of the exemption for the upcoming tax year? (Obj. 2 )

Determining a Tax Refund. If \(\$ 3,432\) was withheld during the year and taxes owed were \(\$ 3,316,\) would the person owe an additional amount or receive a refund? What is the amount? (Obj. 2)

Opportunity cost of Tax Refunds. If 400,000 people each receive an average refund of \(\$ 2,300,\) based on an interest rate of 4 percent, what would be the lost annual income from savings on those refunds? (Obj. 2)

Selecting Federal Tax Forms. Which 1040 form should each of the following individuals use? (Obj. 3) a. A high school student with an after-school job and interest earnings of \(\$ 480\) from savings accounts. b. A college student who, due to ownership of property, is able to itemize deductions rather than take the standard deduction. c. A young, entry-level worker with no dependents and income only from salary.

Tax Deferred Retirement Benefits. If a person with a 28 percent tax bracket makes a deposit of \(\$ 4,000\) to a tax deferred retirement account, what amount would be saved on current taxes? (Obj. 5)