Mingming and Xavier, unrelated single taxpayers, have each incurred a $1,000 expenditure. Before considering this expenditure, Mingming has taxable income of $500,000 and Xavier has taxable income of $32,000. Assume the expenditure qualifies as either a tax deduction or a 25% credit. Which of the following statements is correct?
A) Mingming will prefer the credit, but Xavier will prefer the deduction.
B) Mingming will prefer the deduction, but Xavier will prefer the credit.
C) Both taxpayers will prefer the credit.
D) Both taxpayers will prefer the deduction.
B) Mingming will prefer the deduction, but Xavier will prefer the credit.
Mingming's marginal tax rate is 37% so she will receive higher tax savings from a deduction than a 25% credit, but Xavier's marginal tax rate is 12% so he will receive larger tax savings from the 25% credit.
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Why do the U.S. tax authorities tax passive income generated offshore differently from active income?
What will be an ideal response?
Which of the following is not a requirement or property of a binomial experiment?
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