Bono Owns and Operates a Sole Proprietorship and Has a 30

question 79

Essay

Bono owns and operates a sole proprietorship and has a 30% marginal tax rate.He provides his son,Richie,$12,000 a year for college expenses.Richie works as a street musician and has a marginal tax rate of 15%.What could Bono do to reduce his family tax burden? How much pre-tax income does it currently take Bono to generate the $12,000 after-taxes given to Richie? If Richie worked for his father's sole proprietorship,what salary would Bono have to pay him to generate $12,000 after taxes? (Ignore any Social Security,Medicare,or Self Employment Tax issues.)How much money would this strategy save?

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Definitions:

Primacy Effect

The phenomenon that the first items presented in a series are more likely to be remembered than items in the middle.

Moderate Alcohol Consumption

The intake of alcoholic beverages within limits considered to have minimal health risk, often defined differently across cultures and guidelines.

Fear Appeals

A persuasive message that attempts to arouse fear in order to influence attitudes, intentions, and behaviors towards avoiding harmful activities or situations.

Common Knowledge

Information that is known by many people and can be considered widely understood or recognized.