Roger is considering making a $3,000 investment in a venture that its promoter promises will generate immediate tax benefits for him.Roger, who does not anticipate itemizing his deductions, is in the 30% marginal income tax bracket.If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure, by how much will Roger's tax liability decline because of the investment?
A)$0.
B)$900.
C)$1,100.
D)$1,200.
E)None of the above.

Question

Quizplus · Accepted Answer

A tax credit directly reduces the tax liability. A 40% tax credit on a $3,000 investment results in a $1,200 reduction in tax liability (0.40 * $3,000 = $1,200).

Roger Is Considering Making a $3,000 Investment in a Venture