Bono Owns and Operates a Sole Proprietorship and Has a 32

question 61

Essay

Bono owns and operates a sole proprietorship and has a 32 percent marginal tax rate. He provides his son, Richie, $11,000 a year for college expenses. Richie works as a street musician and has a marginal tax rate of 15 percent. What could Bono do to reduce his family tax burden? How much pretax income does it currently take Bono to generate the $11,000 after taxes given to Richie? If Richie worked for his father's sole proprietorship, what salary would Bono have to pay him to generate $11,000 after taxes? (Ignore any Social Security, Medicare, or self-employment tax issues.)How much money would this strategy save?

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Definitions:

Aryans

An ancient group believed to have migrated to the Indian subcontinent around 1500 BCE, introducing the Vedic culture and languages that would significantly influence the region.

Herding People

Communities or societies whose primary economic activity involves the raising and herding of livestock.

Hinduism

A major world religion originating on the Indian subcontinent and comprising several and varied systems of philosophy, belief, and ritual.

Buddhism

A religious and philosophical system founded by Siddhartha Gautama ("the Buddha") in the 5th century BCE, centering on the pursuit of enlightenment and liberation from suffering.