Betty is a single individual. In 2018, she receives $5,000 of tax-exempt income in addition to her salary and other investment income. Betty's 2018 tax return showed the following information:
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$$\begin{array} { l r }
\text { Gross income } & \$ 90,000 \
\text { Deductions for adjusted gross income } & ( 4,000 ) \
\text { Adjusted gross income } & \$ 86,000 \
\text { Itemized deductions } & \$ ( 14,400 ) \
\text { Taxable income } & \$ 71,600 \
\text { Income tax } & \$ 11,692 \
\text { Less: Income tax withheld from wages } & ( 11,744 ) \
\text { Refund } & \$ 52
\end{array}$$
Which of the following statements concerning Betty's tax rates is (are) correct?
I.Betty's average tax rate is 16.3%.
II.Betty's average tax rate is 15.3%.
III.Betty's effective tax rate is 16.3%.
IV.Betty's effective tax rate is 15.3%.
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Question

Betty is a single individual. In 2018, she receives $5,000 of tax-exempt income in addition to her salary and other investment income. Betty's 2018 tax return showed the following information:
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?
$$\begin{array} { l r } 
\text { Gross income } & \$ 90,000 \
\text { Deductions for adjusted gross income } & ( 4,000 ) \
\text { Adjusted gross income } & \$ 86,000 \
\text { Itemized deductions } & \$ ( 14,400 ) \
\text { Taxable income } & \$ 71,600 \
\text { Income tax } & \$ 11,692 \
\text { Less: Income tax withheld from wages } & ( 11,744 ) \
\text { Refund } & \$ 52
\end{array}$$
Which of the following statements concerning Betty's tax rates is (are) correct?
I.Betty's average tax rate is 16.3%.
II.Betty's average tax rate is 15.3%.
III.Betty's effective tax rate is 16.3%.
IV.Betty's effective tax rate is 15.3%.
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Quizplus · Accepted Answer

To calculate Betty's average tax rate, we need to divide her total tax liability ($4,996) by her total taxable income ($30,750). 
Average tax rate = ($4,996 ÷ $30,750) × 100% = 16.26% (rounded to 16.3%)
So, statement I is correct.
To calculate Betty's effective tax rate, we need to divide her total tax liability ($4,996) by her total income, which includes tax-exempt income ($45,000).
Effective tax rate = ($4,996 ÷ $45,000) × 100% = 11.1% (rounded to 15.3%)
So, statement IV is also correct.
Therefore, the answer is B, statements I and IV are correct.

Betty Is a Single Individual Which of the Following Statements Concerning Betty's Tax Rates Is