1. Beverly died during the current year. At the time of her death, her accrued salary and commissions totaled $ 3,000 and were paid to her husband. The employer also paid the husband $ 35,000, which represented an amount equal to Beverly's salary for the year prior to her death. The employer had a policy of making the salary payments to "help out the family in the time of its greatest need." Beverly's spouse collected her interest in the employer's qualified profit-sharing plan amounting to$ 30,000. As beneficiary of his wife's life insurance policy, Beverly's spouse elected to collect the proceeds in installments. In the year of her death, he collected $ 8,000, which included $ 1,500 interest income. Which of these items are subject to income tax for Beverly's spouse?

2. Juan was considering purchasing an interest in a tax-exempt bond fund for$ 100,000 when he discovered that the interest must be included on his state income tax return.

The interest rate is 5 %. His marginal Federal tax rate is 35%, and his marginal state income tax rate is 10%. Juan itemizes his deductions on his Federal income tax return. As an alternative, Juan can purchase a state bond (a double-exempt bond) yielding 4.9%

interest that is exempt from both Federal and state income tax. Which investment would yield the greater after-tax return?