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Bono Owns and Operates a Sole Proprietorship and Has a 30

question 79

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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?


Definitions:

Protons

Subatomic particles found in the nucleus of an atom, carrying a positive electrical charge, and along with neutrons, contributing to the atomic mass of elements.

Gene Expression

The process by which information from a gene is used in the synthesis of a functional gene product, often a protein, that can affect the cell in which it was produced.

RNA Copy

An RNA copy is a strand of RNA synthesized from a DNA template during the process of transcription, playing a role in protein synthesis and gene regulation.

Hydrolysis Reaction

In this chemical process, water acts to sever the bonds of a certain material.

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