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:

Co-sleeping

A custom in which parents and their children (usually infants) sleep together in the same room.

Infant-parent

Relating to the relationship, interactions, and bond between a baby and their primary caregivers, usually the parents.

Dozing Sleep

A light stage of sleep characterized by a semi-conscious state of drowsiness or nodding off.

Rapid Eye Movement

A phase of sleep characterized by quick movements of the eyes, increased brain activity, and dreaming.