3. Blake works during the semester breaks for the family business and has earned $14,000 this past year. Any investment income above $800 is taxed at the same rate as his parents, who are in the top bracket. His parents have advised him to invest in a Roth IRA for retirement savings.

A summary of the housemates’ goals can be found in the first Continuing Case problem in Chapter 1.

1. What are the benefits to following this strategy?

2. What strategies would you suggest to Blake to reduce his tax liability?