Ward and June are in the 28% tax bracket.Included in their assets is a Dell Corporation bond with a face value of $10,000.The bond pays $1,000 a year in interest.Ward and June make a gift to their son,Wally (age 19)of the $1,000 in interest income.Wally is in the 10% tax bracket.What is Ward and June's tax liability related to the bond and the bond interest for the current year?

Question

Quizplus · Accepted Answer

Ward and June's tax liability related to the bond and the bond interest can be calculated as follows:

- Annual interest income from the bond: $1,000 
- Taxable interest income for Ward and June: $1,000 (since they gifted the interest income to Wally) 
- Taxable income for Ward and June: $10,000 (face value of the bond) + $1,000 (taxable interest income) = $11,000 
- Tax liability for Ward and June: 28% of $1,000 = $280

Therefore, the best choice is C.

Ward and June Are in the 28% Tax Bracket