Questions -

Q1. Jill and George are married and file a joint return. They expect to have $410,000 of taxable income in the next year and are considering whether to purchase a personal residence that would provide additional tax deductions of $80,000 for mortgage interest and real estate taxes.

a. What is their marginal tax rate for purposes of making this decision?

b. What is the tax savings if the residence is acquired?

Q2. Betty, a married taxpayer, makes the following gifts during the current year (2013): $20,000 to her church, $30,000 to her daughter, and $25,000 to her husband.

a. What is the amount of Betty's taxable gifts for the current year (assuming that she does not elect to split the gifts with her spouse)?

b. How would your answer to Part a change if a gift-splitting election were made?