Problem
Marc, a single taxpayer, earns a $240,000 salary, $50,000 in interest from an investment in city of Birmingham Bonds, and $30,000 in employer provided educational assistance (which qualifies a working condition fringe benefit). He has no dependents. Assume that Marc also has no deductions for AGI and does not qualify for the QBI deduction. He has $9,000 in itemized deductions.
i. Would Marc be required to use the Tax Table or the Tax Schedule method? Why would he be required to utilize that particular option?
ii. What is Marc's marginal, average, and effective tax rate? When computing total income for the effective tax rate, ignore any deductions and consider only realized income. Which tax rate is most informative if you are considering the tax implications of a particular transaction? Why? Which tax rate is most informative if you are considering the overall taxpayer burden for a particular time period? Why?