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Philip Purchased One Million Dollars' Worth of New York City

Question 111

Multiple Choice

Philip purchased one million dollars' worth of New York City bonds.His interest earnings were $100,000.His total federal tax on this income will be


A) $40,000, since his marginal tax rate was 40 percent.
B) $40,000, since only 40 percent of capital gains is taxed.
C) zero.
D) very small, since he had a clever accountant who knew how to use loopholes.

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