Pepa Madrigal has operated a very successful bakery for 30 years, and has accumulated investment that earn annual interest income of $40,000. Her other income put her in the top income tax bracket for personal tax purposes. She has a son, Antonio who is 22 years old and currently has no income. Antonio's only personal tax credit is the personal tax credit. Determine the amount of federal income taxes that could be saved by transferring the interest earning investments to a trust with Antonio as the income beneficiary, assuming that the trust will be required to distribute all of its income each year.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Pepa Madrigal has operated a very
successful bakery for 30 years, and has
accumulated investment that earn annual
interest income of $40,000. Her other
income put her in the top income tax
bracket for personal tax purposes. She has
a son, Antonio who is 22 years old and
currently has no income. Antonio's only
personal tax credit is the personal tax credit.
Determine the amount of federal income
taxes that could be saved by transferring
the interest earning investments to a trust
with Antonio as the income beneficiary,
assuming that the trust will be required to
distribute all of its income each year.
Transcribed Image Text:Pepa Madrigal has operated a very successful bakery for 30 years, and has accumulated investment that earn annual interest income of $40,000. Her other income put her in the top income tax bracket for personal tax purposes. She has a son, Antonio who is 22 years old and currently has no income. Antonio's only personal tax credit is the personal tax credit. Determine the amount of federal income taxes that could be saved by transferring the interest earning investments to a trust with Antonio as the income beneficiary, assuming that the trust will be required to distribute all of its income each year.
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