1. Leonard and Marie Hofstadter are married filing jointly taxpayers that expect
ID: 2412792 • Letter: 1
Question
1. Leonard and Marie Hofstadter are married filing jointly taxpayers that expects to earn taxable income of $164,500 in 2018 before considering an investment in $20,000 in either City of San Diego bonds that pay 5.37% or in Qualcomm bonds that pay 7% for the entire of 2018. The bonds have the same non-tax characteristics. What is the preferred investment option (use table pack)?
A. They are equal
B. Cannot be determined
C. San Diego Bond
D. Qualcomm Bond
Table Pack:
Maried Filing Jointly and Surviving Spouses
Taxable Income Taxes
Over $77,400 but not over $165,000 ---------- 8,907 plus 22% of the excess over $77,400
Explanation / Answer
Answer is option D Qualcomm Bond
Leonard and Marie are in the 22% marginal tax bracket if you examine the Maried Filing Jointly taxpayer rate schedule.
Qualcomm bonds= 7% x (1-22%)= 5.46%
City of San Diego bonds =5.37%
Therefore, Qualcomm Bond is better than City of San Diego bonds.
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