Assume that Congress recently amended the tax law to provide for a maximum 12% rate on interest income from U.S. savings bonds. Compute the tax savings from this preferential rate for:A. Mrs. Edwin, who has a 15% marginal rate on ordinary income and earned $290 interest on her investment in U.S. savings bonds. B. Mr. Kalter, who has a 35% marginal rate on ordinary income and earned $290 interest on his investment in U.S. savings bonds.
What will be an ideal response?
A. Mrs. Edwin saved $8.70 ($290 × [15% ordinary rate ? 12% preferential rate]).
B. Mr. Kalter saved $66.70 ($290 × [35% ordinary rate ? 12% preferential rate]).
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