Leon has a substantial portfolio of stocks and bonds as well as cash from some bonds that
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Leon has a substantial portfolio of stocks and bonds as well as cash from some bonds that have recently matured. He has been looking at investing $200,000 in corporate bonds that pay 7% interest. The $14,000 of annual interest would be used to pay his 24-yearold son’s tuition at State University. A friend suggested that Leon loan the money “interest free” to his son, a student who has no other income. The son would then invest the $200,000 in the corporate bonds and use the $14,000 interest to pay his tuition. Leon is in the 24% tax bracket. Would such a strategy reduce his family’s tax? Assume the applicable federal rate is 6.5%.
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Related Book For
Pearsons Federal Taxation 2023 Comprehensive
ISBN: 9780137840656
36th Edition
Authors: Timothy J. Rupert, Kenneth E. Anderson, David S Hulse
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