Question

Mrs. Nunn, who has a 24 percent marginal tax rate on ordinary income, earned $2,690 interest on a debt instrument this year. Required: Compute her federal income tax on this interest assuming that the debt instrument was: (Round your final answers to the nearest whole dollar amount.) An unsecured note from her son, who borrowed money from his mother to finance the construction of his home. A certificate of deposit from a federal bank. A 30-year General Electric corporate bond. A U.S. Treasury note. A City of Memphis municipal bond.

Answer 1

An unsecured note from her son, who borrowed money from his mother to finance the construction of his home.

Not tax exempt so tax is;

= 2,690 * 24%

= $645.60

= $646

A certificate of deposit from a federal bank.

Also not tax exempt so tax is;

= 2,690 * 24%

= $646

A 30-year General Electric corporate bond.

Also not tax exempt so tax is;

= 2,690 * 24%

= $646

A U.S. Treasury note.

Also not tax exempt so tax is;

= 2,690 * 24%

= $646

A City of Memphis municipal bond.

Municipal bond returns are tax exempt so tax payment is $0.