Katie, a resident of Virginia, is considering purchasing a $100,000 North Carolina bond that yields 4.6% before tax. She is in the 35% Federal marginal tax bracket and the 5% state marginal tax bracket. She is aware that State of Virginia bonds of comparable risk are yielding 4.5%. However, the Virginia bonds are exempt from Virginia tax, but the North Carolina bond interest is taxable in Virginia. Katie can deduct any state taxes paid on her Federal income tax return. In your analysis, assume that the bond amount is $100,000. If required, round your computations and answers to the nearest dollar. Assume that Katie itemizes her deductions for federal taxes. Determine the after tax income from each bond. Virginia Bond: $fill in the blank 1 North Carolina Bond: $fill in the blank 2

Individual Income Taxes
43rd Edition
ISBN:9780357109731
Author:Hoffman
Publisher:Hoffman
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 16DQ: Tammy, a resident of Virginia, is considering purchasing a North Carolina bond that yields 4.6%...
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Katie, a resident of Virginia, is considering purchasing a $100,000 North Carolina bond that yields 4.6% before tax. She is in the 35% Federal marginal tax bracket and the 5% state marginal tax bracket. She is aware that State of Virginia bonds of comparable risk are yielding 4.5%. However, the Virginia bonds are exempt from Virginia tax, but the North Carolina bond interest is taxable in Virginia. Katie can deduct any state taxes paid on her Federal income tax return. In your analysis, assume that the bond amount is $100,000.

If required, round your computations and answers to the nearest dollar. Assume that Katie itemizes her deductions for federal taxes.

Determine the after tax income from each bond.

Virginia Bond: $fill in the blank 1
North Carolina Bond: $fill in the blank 2
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