Ahmad Is Considering Making a $5,000 Investment in a Venture

question 94

Multiple Choice

Ahmad is considering making a $5,000 investment in a venture which its promoter promises will generate immediate tax benefits for him.Ahmad, who normally itemizes his deductions, is in the 28% marginal tax bracket.If the investment is of a type where the taxpayer may claim either a tax credit of 25% of the amount of the expenditure or an itemized deduction for the amount of the investment, what treatment normally would be most beneficial to Ahmad and by how much will Ahmad's tax liability decline because of the investment?

• A)$0, take neither the itemized deduction nor the tax credit.
• B)$1,250, take the tax credit.
• C)$1,400, take the itemized deduction.
• D)Both options produce the same benefit.
• E)None of the above.

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Definitions:

Management-By-Objectives

A strategic management model where managers and employees work together to set, monitor, and achieve specific goals within an organization.

Jointly Agreed

Reached through a cooperative process where all parties involved give consent to terms or decisions.

Human Resource Management

The strategic approach to the recruitment, management, development, and well-being of an organization's employees.

Subjective Performance

Evaluation of an employee's performance based on personal judgments rather than measurable outcomes.