1. Which of the following is an acceptable example of the timing strategy?

A. A cash basis taxpayer avoids collecting income that is made unconditionally available. B. A taxpayer investing in a tax preferred investment. C. None the choices are correct. D. A parent employing her child in the family business. E. A business paying its owner a dividend.

2. A TP invests $300,000 in a city of Providence (municipal) bonds that pays 7% interest. Alternatively, he could have invested the $300,000 in a bond recently issued by Ocean State Corporation, Inc (corporate bond) that pays 10% interest with similar risk as the city of Providence bond. Assume that the TPs marginal tax rate is 37%.

How much tax would the TP be responsible for paying on interest earned on the Ocean State Corporation Inc. bond?

A. $11,000

B. $21,000

C. $30,000

D. $7,875

E. None of the choices are correct.