Bart and Kesha, who are in the 39.6% tax bracket, are interested in reducing their taxes. They are currently considering several alternatives. For each, indicate how much tax, if any, they would save.
a. Make a gift of bonds valued at $5,000 that yield $400 per year interest to their 24-yearold daughter, who has no other income.
b. Sell the bonds from Part a rather than give them to their daughter, and buy tax-exempt bonds that pay 6%. Assume the bonds can be sold for an amount equal to their basis of $5,000.
c. Give $1,000 cash to a charity. Assume they itemize deductions and ignore any phaseout of itemized deductions.
d. Pay their daughter a salary of $10,000 for services rendered in their unincorporated business.