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Author Question: Daniel plans to invest $20,000 in either a corporate bond paying 5% or a tax-exempt bond with a 4% ... (Read 99 times)

imowrer

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Question 1

While certain income of a minor is taxed at the parent's tax rate, discuss how income shifting may still be accomplished and any constraints that may exist on income shifting.

Question 2

Daniel plans to invest $20,000 in either a corporate bond paying 5% or a tax-exempt bond with a 4% interest rate. The bonds have an equivalent level of risk. Daniel has a 33% marginal tax rate and wants to maximize his after-tax earnings. Daniel should
◦ invest in the corporate bond due to its higher stated interest rate.
◦ invest in the tax-exempt bond since its yield is more than the after-tax return on the corporate bond.
◦ invest in the corporate bond because its after-tax earnings are more than the return on the tax-exempt bond.
◦ allocate his money equally between the two investments.


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Marked as best answer by imowrer on Sep 13, 2020

akemokai

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imowrer

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Reply 2 on: Sep 13, 2020
Thanks for the timely response, appreciate it


Mochi

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Reply 3 on: Yesterday
Gracias!

 

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