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Mr. Harry, who was a resident of State $Y$ for only 7 months last year
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05 Jun 2025, 00:29
05 Jun 2025, 00:29
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Mr. Harry, who was a resident of State $Y$ for only 7 months last year, had a taxable income of $\(\$ 300,000\)$ for the year. If the state tax rate was 8 percent of the year's taxable income prorated for the proportion of the year during which the taxpayer was a resident, what would be the amount of Mr. Harry's State $Y$ tax for last year?
(A) $\(\$ 14,000\)$
(B) $\(\$ 21,000\)$
(C) $\(\$ 24,000\)$
(D) $\(\$ 28,000\)$
(E) $\(\$ 36,000\)$
(A) $\(\$ 14,000\)$
(B) $\(\$ 21,000\)$
(C) $\(\$ 24,000\)$
(D) $\(\$ 28,000\)$
(E) $\(\$ 36,000\)$
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Re: Mr. Harry, who was a resident of State $Y$ for only 7 months last year
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07 Jun 2025, 04:00
07 Jun 2025, 04:00
Expert Reply
1. Calculate the total potential state tax for the year:
Taxable income = \$300,000
State tax rate $\(=8 \%\)$
Total potential tax $\(=\$ 300,000\)$ \times $\(0.08=\$ 24,000\)$
2. Determine the proportion of the year Mr. Harry was a resident:
Mr. Harry was a resident for 7 months out of 12 months in a year.
Proportion $\(=7 / 12\)$
3. Prorate the total potential tax:
Prorated tax $=$ Total potential tax $\(\times\)$ Proportion
Prorated tax $\(=24,000 \times \frac{7}{12}\)$
Prorated tax $\(=2,000 \times 7\)$
Prorated tax $\(=\$ 14,000\)$
Therefore, the amount of Mr. Harry's State Y tax for last year would be \(\$14,000\).
The correct answer is $\((A)\)$.
Taxable income = \$300,000
State tax rate $\(=8 \%\)$
Total potential tax $\(=\$ 300,000\)$ \times $\(0.08=\$ 24,000\)$
2. Determine the proportion of the year Mr. Harry was a resident:
Mr. Harry was a resident for 7 months out of 12 months in a year.
Proportion $\(=7 / 12\)$
3. Prorate the total potential tax:
Prorated tax $=$ Total potential tax $\(\times\)$ Proportion
Prorated tax $\(=24,000 \times \frac{7}{12}\)$
Prorated tax $\(=2,000 \times 7\)$
Prorated tax $\(=\$ 14,000\)$
Therefore, the amount of Mr. Harry's State Y tax for last year would be \(\$14,000\).
The correct answer is $\((A)\)$.
gmatclubot
Re: Mr. Harry, who was a resident of State $Y$ for only 7 months last year [#permalink]
07 Jun 2025, 04:00
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