Mable is a wealthy widow who has come to you for tax advice. She is in the 35 percent tax bracket. She has a choice between investing in a high-quality municipal bond paying 3.5 percent or a high-quality corporate bond paying 7 percent. From a tax standpoint, which investment would you advise her to make and why? Please show your work.
Q: Ms. Vincent resides in a jurisdiction with a 35 percent income tax. Ms. Vincent has $40,000 that she…
A: An increase in the income tax rate decreases the after-tax value of the bond with an investment of…
Q: Our biggest client is Trang Nguyen. Trang's only source of income is $40,000,000 of income from a…
A: Only source of income is $40,000,000 from a partnership Deduction $600,000 in property taxes. Net…
Q: Anthony and Susan are married filing jointly. Their combined income is currently $98,000. Both have…
A: Increment of 8,500 will push the taxable income to the level of = Old income + increment = 98,000 +…
Q: Eduardo, a single taxpayer, has $80,000 of taxable income plus $25,000 income from tax-exempt bonds.…
A: Effective tax rate: Effective tax rate is the rate at which a person pays the taxes. This effective…
Q: Does Fatima make more money if she takes the raise? If so, how much more will Fatima make a year if…
A: Income tax: A fee charged by the government of the country on the taxable income earned by the…
Q: Katie, a resident of Virginia, is considering purchasing a $100,000 North Carolina bond that yields…
A: This is a question of comparison of 2 types of bonds earning income but income from one type of bond…
Q: Larry is married and has five children. He is worried about the stability of his current employment…
A: The estate tax is not significantly much.
Q: Pepa Madrigal has operated a very successful bakery for 30years, and has accumalated investment that…
A: When the income is from 10267 to 41775 then tax is 12%.
Q: Sandra would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C…
A: Cash flow after taxes (CFAT) is a financial performance indicator that demonstrates a company's…
Q: Luma, who works for Microsoft Corp and owns 10,000 shares of American Airlines borrowed the…
A: IRS has a concept of imputed interest. Imputed interest is calculated when the loan is lent at no…
Q: Diana sold mutual fund shares she had owned 4 years so that she could use to the proceeds to travel…
A: Given : Capital gain = $ 75258 Marginal tax bracket = 35% And , Capital gain tax rate = 15%
Q: How could Samuel have received better tax consequences?
A: IRA stands for individual retirement account used by the financial bodies in the USA. The main…
Q: Tom sold mutual shares he had owned 3 years so that he could use the proceeds to return to college.…
A: The capital gains will be treated long-term capital gains as they are held for more than 3 years.…
Q: Jorge and Anita, married taxpayers, earn $150,000 in taxable income and $40,000 in interest from an…
A: Federal income tax withholding: The amounts which the employer withheld from employees’ gross pay…
Q: Moana is a single taxpayer who operates a sole proprietorship. She expects her taxable income next…
A: In US, the Corporations are taxed at flat rate of 21%.
Q: Dennis is currently considering investing in municipal bonds that earn 6 percent interests, or in…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Adam Fleeman, a skilled carpenter, started a home improvement business with Tom Collins, a master…
A: Social Security tax refers to the tax which is implied on both employees and employers in order to…
Q: Marey is a 17 year old dependent high school student with income from wages of $8,000 and S4,000 of…
A: Income tax refers to the tax liability which is imposed on an individual or a corporation or an…
Q: 8. Lisa is 17 years old and is a dependent of her parents. She has income from a summer job of…
A:
Q: A taxpayer is trying to decide between two investments: a State of Vermont bond that will pay 3.20%…
A:
Q: Jan has a 35% marginal tax rate and has already recognized a STCL of $12,000 and a LTCG of $10,000,…
A: Irrespective of the marginal tax rate, capital gain tax rate on collectibles/ antiques is 28%.
Q: You are Melina’s CPA, she to whom Walter “Buck” Swords left $50,000 and a used car in his will. What…
A: Inheritance in simple words can be defined as an act of passing on the property, cash, estates or…
Q: Anne Smith works as a dentist. In addition to what she does for a living, she runs a restaurant. She…
A: Taxable Income: It specifies the basis on which the income system sets the tax. In other words, the…
Q: Suppose you are28 and married. You and your spouse file for income taxes jointly. You are in the 25%…
A: Being married and filing income tax returns jointly means the income slab will be $168,401 and…
Q: Adelaide is self-employed and must submit estimated quarterly tax payments. Her predicted total tax…
A: Total Tax Liability = $ 36000 Current Withholdings = $ 18283
Q: Would you sign this return if you were Tom and Teri’s Paid Tax Preparer? Why or why not? Your…
A: Generally, Bad debts are of two types, they are : 1. Business bad debts 2. Non business bad debts…
Q: What tax forms should be used for the following tax return? Tim is a self-employed business person…
A: Introduction A Tax Return is tax form used to file the income, expenses etc to tax authorities. Tax…
Q: Jermaine and Kesha are married, file a joint tax return, have AGI of $75,000, and have two children.…
A: Concept used: Maximum up to tax liability or Actual paid or 2500 whichever amount is lower will be…
Q: Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively,…
A: Calculation of Explicit tax she have paid and after tax rate of return on surething bond are as…
Q: Fatima is about to get a raise at her job and she will go from being paid $37,000 a year to being…
A: Personal Exemptions: Along with the standard deduction, personal exemptions provide that only income…
Q: Tonya, who lives in California, inherited a $100,000 State of California bond in 2021. Her marginal…
A: California Bond: Interest payment = 3.3% Interest is not subject to California Income tax. Most…
Q: 1.Kevone is single and works for a local tech firm. He earned $87,000 last year in taxable wages,…
A: The adjusted gross income is the net earning of the taxpayer after deductions and exemptions. The…
Q: Campbell, a single taxpayer, earns $440,000 in taxable income and $4,000 in interest from an…
A: “Since you have posted a question with multiple sub-parts, we will solve the first three subparts…
Q: Advise Cheryl of her tax consequences from the following transactions: (a) Donation of $300 to the…
A: Specific deductions are based on specific sections and case laws of the income tax act
Q: What tax forms are needed for the following example? Tim and Sarah Lawrence are married and filing a…
A: Step 1: Compute the taxable income for Tim and Sarah for the year for 2019.
Q: Melinda invests $200,000 in a City of Heflin bond that pays 6 percent interest. Alternatively,…
A: As the question contains multiple sub-parts and student has not specifically mentioned which…
Q: Kevin is 38 years old, and his current gross monthly income is $3,800. Given an average personal tax…
A: Net income is defined as the income left with the business entity or an individual after paying off…
Q: Amy is single with a salary of $50,000. She has been offered a new position that will raise her…
A: Existing Salary of Amy = $50,000New Salary of Amy = $53,000Raise in Salary = $53,000 - $50,000 =…
Q: Pepa Madrigal has operated a very successful bakery for 30 years, and has accumulated investment…
A: Rate of tax = 12% Single taxpayer from 10276 to 41775 is taxed at the rate of 12%.
Q: Tom and Rachel are married and living together in California. Their income is as follows: Tom's…
A: INTRODUCTION: Income tax is a tax paid to the government depending on your earnings (and profit, in…
Q: David has the option to invest in one of the following Town of Elmdale bond that pays 6% interest…
A: Tax perspective on the bonds municipal bonds are not taxable where corporate bonds are taxable
Q: Moni and Bille Waka are in the 25 percent tax bracket, considering both federal and state personal…
A: Given data, Tax bracket =25% Contribution=$500,000 Taxable income =$3,000,000 Before donation tax…
Q: Campbell, a single taxpayer, earns $428,000 in taxable income and $3,400 in interest from an…
A: The tax liability of a taxpayer depends upon the taxable income and the filing status. The tax…
Q: How much of Darlene's distribution is subject to the 10% additional tax?
A: A traditional IRA refers to the retirement account of an individual where he could make…
Mable is a wealthy widow who has come to you for tax advice. She is in the 35 percent tax bracket. She has a choice between investing in a high-quality municipal bond paying 3.5 percent or a high-quality corporate bond paying 7 percent. From a tax standpoint, which investment would you advise her to make and why? Please show your work.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- In each of the following problems, identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify. Binh met Anika 10 years ago at a cocktail party. Anika was a wealthy investor with extensive holdings in the oil and gas industry. Binh was a real estate agent earning about 35,000 a year. Several months later, Binh proposed marriage and Anika accepted. Just before the wedding, Anika told Binh that she had a mental hangup about marriage, and Binh agreed to live with her without being married. In return, Anika promised to leave Binh her entire estate. In the ensuing years, they had an intimate, marriage-like relationship, attending social, business, and family functions together. Anika died in 2015. No will was found immediately. A few months after Anikas death, her sister found a one-page paper signed by Anika. The paper left Anikas entire estate to her brothers and sisters and named her sister as executor of the estate. Binh sued Anikas estate and won a judgment of 2 million for services rendered to Anika during their relationship. The estate appealed the decision, which was affirmed as to liability but reversed and remanded for a new trial on the amount of the judgment. Binh and the estate subsequently worked out an agreement in which the estate paid Binh 1.2 million to settle his claim.Bonnie is married and has one child. She owns Bonnies Rib Joint, which produces a taxable income of approximately 120,000 per year. a. Assume that Bonnies taxable income is 40,000 without considering the income from the rib joint. How much tax will she pay on the 120,000 of income from the rib joint? b. You work for the firm that prepares Bonnies tax return. Bonnie has asked the partner for whom you work to advise her on how she might lower her taxes. The partner has assigned you this task. Draft a memorandum to the partner that contains at least two options Bonnie could use to lower her taxes. For each option, explain the calculations that support the tax savings from your recommendation.A paid tax preparer must demonstrate due diligence. Review the following scenario, and then choose the appropriate response. Cherylynn Johnson (58) comes in to your office to have her tax return prepared. She states that she wants to use the head of household filing status and claim the Earned Income Tax Credit (EITC). She also tells you that her dependent child is her granddaughter, Alana (12), who currently lives with her. All of the following are appropriate questions to ask or actions to take EXCEPT: Ask Cherylynn how long Alana has lived with her and inquire into the whereabouts of Alana's parents. Ask Cherylynn who paid most of the expenses of maintaining her home. Inform Cherylynn that she must provide you with documentation proving Alana lived with her before you can prepare the return. Inquire whether the IRS has ever denied or reduced Cherylynn's EITC in a prior year.
- Explain the tax effect based on providing $180,000 per year for the client’s salary and $70,000 per year for his daughter’s salary if they withdraw cash from the business or pay dividends as appropriate. E. Justify the percentage of ownership the client’s daughter should have in the business based on the type of business entity recommended. Consider the tax law in reference to the recommendation and how the decision will affect the daughter’s tax return. Answer for a S-Corporation pleaseWhich taxpayer may benefit from the investment interest expense deduction? A. Everett. He borrowed money from his broker and used the funds to buy tax-exempt bonds. He paid interest on the loan. B. Frank. He opened a margin account with his broker, as he wanted access to a line of credit. He did not borrow any money from the account during the year. C. Marissa. She borrowed money from her broker to buy shares of stock for her investment account. She paid interest on the loan. D. Roberta. She borrowed money on her margin account and used the funds for a home-improvement project. She paid interest on the loan.Kim and Kayne have been dating for years and are now thinking about getting married. As a financially sophisticated couple, they want to think through the tax implications of their potential union. a. Suppose Kim and Kanye both earn $65,000 (so their combined income is $130,000). Using the tax bracket information Data table (Click the icon here in order to copy the contents of the data table below into a spreadsheet.) TABLE 1.2: Federal Income Tax Rates and Brackets for Individual Returns (2018) Tax Rates Taxable Income Taxes 10.0% $0 to $9,875 10% of taxable income 12.0% $9,876 to $40,125 $987.50, plus 12% of the amount over $9,876 22.0% $40,126 to $85,525 $4,617.50, plus 22% of the amount over $40,126 24.0% $85,526 to $163,300 $14,605.50, plus 24% of the amount over $85,526 32.0% $163,301 to $207,350 $33,271.50, plus 32% of the amount over…
- Evaluate the three strategies reducing income, increasing deductions, and taking advantage of tax credits that you listed based on their overall effect on a person's tax situation (the amount of income taxes that the person will have to pay). Evaluate the ethical issues related to the payment of income taxes. in other words, if there is a legal tax-saving strategy available to a person who earns $50,000 per year, will it be ethical for the person to utilize this strategy in order to pay less tax? State how your answer to the previous question would change if the person were making $1,500,000.Mary(58) comes into your office to have her tax return prepared. She states that she wants to use the head of household filing status and claim the Earned Income Tax Credit (EITC). She also tells you that her dependent child is her granddaughter, Julie (12), who currently lives with her. You as a paid tax preparer, all of the following are appropriate questions to ask or actions to take EXCEPT: 1). Ask Mary how long Julie has lived with her and inquire into the whereabouts of Julie's parents. 2). Ask Mary who paid most of the expenses of maintaining her home. 3). Inform Mary that she must show you documentation proving Julie lived with her before you can prepare the return. 4) Inquire as to whether anyone else can possibly claim Julie as a dependent.A taxpayer is trying to decide between two investments: a State of Vermont bond that will pay 3.20% interest annually or preferred corporate stock that will pay 3.75% dividends annually. What tax-related factors should the taxpayer consider in making their investment decision?
- Would you sign this return if you were Tom and Teri’s Paid Tax Preparer? Why or why not? Your clients, Tom (age 48) and Teri (age 45) Trendy, have a son, Tim (age 27). Tim lives in Hawaii, where he studies the effects of various sunscreens on his ability to surf. Last year, Tim was out of money and wanted to move back home and live with Tom and Teri. To prevent this, Tom lent Tim $20,000 with the understanding that he would stay in Hawaii and not come home. Tom had Tim sign a formal note, including a stated interest rate and due date. Tom has a substantial portfolio of stocks and bonds and has generated a significant amount of capital gains in the current year. He concluded that Tim is a deadbeat and the $20,000 note is worthless. Consequently, Tom wants to his son’s bad debt on his and Teri’s current tax return and net it against his other capital gains and losses. Tom is adamant about this!Suppose you are28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues. If your employer provides the following matching schedule on your contribution to the 401 (k): 100% matching for the first 3% of your salary and then 50% matching for the next 2% of your salary. You plan to work for the current employer for 3-7 years before you start your own business. Which one of the following seems to be the best investment strategy? a.Invest all your income inside your regular taxable investment account. b.First, contribute 5% of your salary to your 401 (k), then invest the rest in your IRAs and Roth IRA account, finally invest the remaining money, if any, in your regular taxable investment account. c.Contribute 5% of your salary to your 401 (k), and then invest all the rest money in your regular taxable investment account. d.First, fully fund your IRA and Roth IRA account, then fund your401 (k),…Melinda invests $330,000 in a City of Heflin bond that pays 4.8 percent interest. Melinda could have invested the $330,000 in a bond recently issued by surething incorporated that pays 8 percent interest and has risk and other characteristics similar to the city of Heflin bond. Assume Melinda’s marginal tax rate is 40 percent. A. What is her after tax rate of return for the city of Heflin bond? B. How much explicit tax does Melinda pay on the city of Heflin bond? C. How much implicit tax does she pay on the city of Heflin bond? D. How much explicit tax would she have to paid on the sure thing incorporated bond? E. What is her after tax of return on the sure thing incorporated bond?