Mrs. Franklin, who is in the 37 percent tax bracket, owns a reside income. She plans to create a family partnership by giving each c will retain a 60 percent interest.) Mrs. Franklin will manage the bu

Mrs. Franklin, who is in the 37 percent tax bracket, owns a reside income. She plans to create a family partnership by giving each c will retain a 60 percent interest.) Mrs. Franklin will manage the bu

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mrs. Franklin, who is in the 37 percent tax bracket, owns a residential apartment building that generates $110,000 annual taxable
income. She plans to create a family partnership by giving each of her two children a 20 percent equity interest in the building. (She
will retain a 60 percent interest.) Mrs. Franklin will manage the building, and value of her services is $30,000 per year. If Mrs. Franklin's
children are in the 12 percent tax bracket, compute the tax savings from this income-shifting arrangement. (Ignore any payroll tax
consequences.)
Tax savings from this income-shifting arrangement

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