Ward and June are in the 28% tax bracket.Included in their assets is a Dell Computer Corporation bond with a face value of $10,000.The bond pays $1,000 a year in interest.Ward and June gift the bond to their son,Wally (age 19),on January 1,2016.Wally is in the 15% tax bracket.The 2016 net tax savings for the family unit of Ward,June and Wally related to the transfer of the bond is

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The correct answer is B. The net tax savings for the family unit is $130. This is because Ward and June are in the 28% tax bracket, and Wally is in the 15% tax bracket. The interest on the bond is $1,000, so Ward and June would have to pay $280 in taxes on the interest if they kept the bond. However, since they gifted the bond to Wally, they will not have to pay any taxes on the interest. Wally will only have to pay $150 in taxes on the interest, so the net tax savings for the family unit is $130.

Ward and June Are in the 28% Tax Bracket