Bono Owns and Operates a Sole Proprietorship and Has a 30

Essay

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?