Tiptop Farms, a sole proprietorship, had a gross income of $600,000 in 2016. Tiptop Farms expenses were equal to $320,000. Tiptop had interest expenses of $80,000 and depreciation expenses of $75,000 during the year.
Tiptop's owner withdrew $25,000 from the business during the year to help pay college expenses for the owners' children. The tax schedule for 2016 is:
| Income |
Tax Rate |
| $0-40,000 |
15% |
| 40,001 - 100,000 |
28% |
| 100,000 - 150,000 |
31% |
| 150,000 + |
35% |
a) What was Tiptop's taxable income during 2016?
b) What is Tiptop's tax liability for 2016?
c) What is Tiptop's average and marginal tax rate for the year?
d) If Tiptop is considering the prucahse of a new investment, waht tax rate should they use?