McGraw-Hill's Taxation of Individuals 3rd Edition by Brian Spilker,Benjamin Ayers,John Robinson,Edmund Outslay ,Ronald Worsham,John Barrick,Connie Weaver

Exercise 6

Tawana owns and operates a sole proprietorship and has a 40 percent marginal tax rate.She provides her son, Jonathon, $8,000 a year for college expenses.Jonathon works as a pizza delivery person every fall and has a marginal tax rate of 15 percent.What could Tawana do to reduce her family tax burden How much pretax income does it currently take Tawana to generate the $8,000 after-taxes given to Jonathon If Jonathon worked for his mother's sole proprietorship, what salary would she have to pay him to generate $8,000 after taxes (ignoring any Social Security, Medicare, or self-employment tax issues) How much money would this strategy save