MCGRAW-HILL'S TAX.OF INDIV.+BUS.2020
20th Edition
ISBN: 9781259969614
Author: SPILKER
Publisher: MCG
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Textbook Question
Chapter 7, Problem 34P
Dana intends to invest $30,000 in either a Treasury bond or a corporate bond. The Treasury bond yields 5 percent before tax and the corporate bond yields 6 percent before tax. Assuming Dana’s federal marginal rate is 24 percent and her marginal state rate is 5 percent, which of the two options should she choose? If she were to move to another state where her marginal state rate would be 10 percent, would her choice be any different? Assume that Dana itemizes deductions.
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Dana intends to invest $66,000 in either a Treasury bond or a corporate bond. The treasury bond yields 5 percent before tax, and the corporate bond yields 6 percent before tax. Assume Dana's federal marginal rate is 24 percent and she itemizes deductions.
a-2. How much interest after-tax would Dana earn by investing in the corporate bond?
b-1. If she were to move to another state where her marginal state rate would be 10 percent, which of the two options should she choose?
b-2. How much interest after-tax would Dana earn by investing in the corporate bond as per requirement b-1?
Dana intends to invest $60,000 in either a Treasury bond or a corporate bond. The Treasury bond yields 5 percent before tax and the corporate bond yields 6 percent before tax.
Required: a-1. Assuming Dana’s federal marginal rate is 24 percent and her marginal state rate is 5 percent, which of the two options should she choose? Assume that Dana itemizes deductions.
a-2. How much interest after-tax would Dana earn by investing in the corporate bond? Note: Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.
b-1. If she were to move to another state where her marginal state rate would be 10 percent, which of the two options should she choose? Assume that Dana itemizes deductions.
b-2. How much interest after-tax would Dana earn by investing in the corporate bond as per requirement b-1? Note: Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.
Ms. Zelda has decided to invest $75,000 in state bonds. She could invest in State A
bonds paying 5 percent annual interest or in State R bonds paying 5.4 percent annual
interest. The bonds have the same risk, and the interest from both is exempt from
federal income tax. Because Ms. Zelda is a resident of State A, she wouldn't pay State
A's 8.5 percent personal income tax on the State A bond interest, but she would pay this
tax on the State R bond interest. Ms. Zelda can deduct any state tax payments in the
computation of her federal taxable income, and her federal marginal rate is 32 percent.
Required:
a. Compute Ms. Zelda's after-tax return from State A and State R bonds.
2. Should Ms. Zelda invest in the State A or the State R bonds?
Complete this question by entering your answers in the tabs below.
Required A Required B
Compute Ms. Zelda's after-tax return from State A and State R bonds.
Note: Enter costs with a minus sign. Round your intermediate computations and final answers…
Chapter 7 Solutions
MCGRAW-HILL'S TAX.OF INDIV.+BUS.2020
Ch. 7 - Describe how interest income and dividend income...Ch. 7 - What is the underlying policy rationale for the...Ch. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Why would taxpayers generally prefer the tax...Ch. 7 - In what ways are U.S. savings bonds treated more...Ch. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Compare and contrast the tax treatment of...Ch. 7 - What is the definition of a capital asset? Give...
Ch. 7 - Why does the tax law allow a taxpayer to defer...Ch. 7 - Prob. 12DQCh. 7 - What is the deciding factor in determining whether...Ch. 7 - Prob. 14DQCh. 7 - Prob. 15DQCh. 7 - Prob. 16DQCh. 7 - What happens to capital losses that are not...Ch. 7 - Prob. 18DQCh. 7 - Prob. 19DQCh. 7 - What is a wash sale? What is the purpose of the...Ch. 7 - Prob. 21DQCh. 7 - Describe three basic tax planning strategies...Ch. 7 - Prob. 23DQCh. 7 - Prob. 24DQCh. 7 - Prob. 25DQCh. 7 - What limitations are placed on the deductibility...Ch. 7 - When taxpayers borrow money to buy municipal...Ch. 7 - What types of losses may potentially be...Ch. 7 - Prob. 29DQCh. 7 - Discuss the treatment of suspended passive losses...Ch. 7 - What tests are applied to determine if losses...Ch. 7 - Prob. 32DQCh. 7 - Prob. 33PCh. 7 - Dana intends to invest 30,000 in either a Treasury...Ch. 7 - Prob. 35PCh. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Prob. 39PCh. 7 - Prob. 40PCh. 7 - Prob. 41PCh. 7 - Prob. 42PCh. 7 - Prob. 43PCh. 7 - Prob. 44PCh. 7 - Matt and Meg Comer are married and file a joint...Ch. 7 - Grayson (single) is in the 24 percent tax rate...Ch. 7 - Prob. 47PCh. 7 - During the current year, Ron and Anne sold the...Ch. 7 - In 2019, Tom and Amanda Jackson (married filing...Ch. 7 - For 2019, Sherri has a short-term loss of 2,500...Ch. 7 - Three years ago, Adrian purchased 100 shares of...Ch. 7 - Prob. 52PCh. 7 - Prob. 53PCh. 7 - Prob. 54PCh. 7 - Prob. 55PCh. 7 - Mickey and Jenny Porter file a joint tax return,...Ch. 7 - Prob. 57PCh. 7 - Prob. 58PCh. 7 - Prob. 59PCh. 7 - Rubio recently invested 20,000 (tax basis) in...Ch. 7 - Prob. 61PCh. 7 - Prob. 62PCh. 7 - Prob. 63CP
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