Question

Mr. and Mrs. Maxwell are equal partners in Family partnership. The Maxwell's marginal tax rate is 35%. Next year, the partnership is expected to generate $200,000 of ordinary income. The Maxwells are considering transferring 20% interests in the partnership to each of their children. Their daughter, Melissa, has a 12% marginal tax rate. Their son, Mark, has a 22% marginal tax rate. Calculate the expected annual tax savings to the family from the proposed transfer of partnership interests.

A. $14,000

B. $28,000

C. $14,400

D. $16,000

Answer 1

Savings from transfer to Melissa	200000*.2*(35-12)%	9200
Savings from transfer to Mark	200000*.2*(35-22)%	5200
	Total	$14,400

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