During the Current Year, Khalid Was in an Automobile Accident

question 86

Multiple Choice

During the current year, Khalid was in an automobile accident and suffered physical injuries. The accident was caused by Rashad's negligence. Khalid threatened to file a lawsuit against Amber Trucking Company, Rashad's employer, claiming $50,000 for pain and suffering, $90,000 for loss of income, and $70,000 in punitive damages. Amber's insurance company will not pay punitive damages? therefore, Amber has offered to settle the case for $100,000 for pain and suffering, $90,000 for loss of income, and nothing for punitive damages. Khalid is in the 35% marginal tax bracket. What is the after-tax difference to Khalid between Khalid's original claim and Amber's offer?

• A) Amber's offer is $20,000 less. ($50,000 + $90,000 + $70,000 - $100,000 - $90,000).
• B) Amber's offer is $7,000 less. [($50,000 + $90,000 + $70,000 - $100,000 - $90,000) × .35)].
• C) Amber's offer is $4,500 more. {$190,000 - ($50,000 + $90,000) + [$70,000 × (1 - .35)]}.
• D) Amber's offer is $22,000 more. [($190,000 - $210,000) + ($120,000 × .35)].
• E) None of these.

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Definitions:

Work History

A record of an individual's past employment experiences, including positions held, responsibilities, and durations of employment.

Prospective Employers

Entities or individuals considering hiring someone for a job or position.

Application Letter

A document sent with one's resume to provide additional information on one's skills and experience, typically when applying for a job.

Company's Correspondence

Official communication or documents exchanged by a company with its stakeholders, including emails, letters, and memos.