Question

Problem 3-51 (LO 3-4) (Algo) Skip to question [The following information applies to the questions displayed below.] Tawana owns and operates a sole proprietorship and has a 37 percent marginal tax rate. She provides her son, Jonathon, $9,500 a year for college expenses. Jonathon works as a pizza delivery person every fall and has a marginal tax rate of 15 percent. Problem 3-51 Part-b (Algo) b. How much pretax income does it currently take Tawana to generate the $9,500 (after-taxes) given to Jonathon

Answer 1

The amount of her pretax income that it currently take Tawana to generate the $9,500 (after-taxes) given to Jonathon is $15,079.

Pretax income

Using this formula

After-tax income = Pretax income x (1 - marginal tax rate)

Where:

After-tax income=$9,500

Marginal tax rate=37%

Pretax income=?

Let plug in the formula

$9500 = Pretax income x (1 - .37)

Pretax income = $9500 / (.63)

Pretax income= $15,079

Inconclusion the amount of her pretax income that it currently take Tawana to generate the $9,500 (after-taxes) given to Jonathon is $15,079.

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