B, an unmarried taxpayer, knows that her last dollar of income in the current year will be taxed at 15 percent.D, an unmarried taxpayer, knows that his last dollar of current year income will be taxed at 28 percent.Which of the following statements is not true taking into account the above assumptions?
A)D's marginal tax rate is greater than B's.
B)The value of a $3,000 IRA deduction to D will be less than the same amount contributed by B to an IRA.
C)If both parties suffer a $100,000 business loss that is fully deductible, the impact of the deductible loss will be greater on D's return than on B's return.
D)B will pay 15 percent of her taxable income to the government.
E)D will not pay 28 percent of his taxable income to the government.

Question

Quizplus · Accepted Answer

A and D are true statements based on the given assumptions. C is true because even though both parties can fully deduct the $100,000 loss, D's taxable income is likely higher so the impact of the deduction will be greater on his return. However, B's marginal tax rate is lower than D's, so the value of a $3,000 IRA deduction will be greater for B as it will save her 15% in taxes while it will only save D 28%. Therefore, statement B is not true. Statement E cannot be determined from the given information.

B, an Unmarried Taxpayer, Knows That Her Last Dollar of Income