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Brooklyns granddad paid Brooklyn a salary of $12,000 to work in the family business. Granddads marginal tax bracket was 32%. Brooklyn had no other income.

Brooklyn’s granddad paid Brooklyn a salary of $12,000 to work in the family business. Granddad’s marginal tax bracket was 32%. Brooklyn had no other income. Brooklyn is 11 years old.

1. Is this an example of income shifting?

2. What is the net savings to Granddad and Brooklyn (Grandad’s tax savings – Brooklyn’s gross tax)?

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