Donna is married to Don and they have two children, Danielle, age 25, and Susan, age 15. Donna earns $250,000 annually while Don earns $100,000. Danielle works full time and earns $30,000 annually while Susan is still in high school and doesn't have any income. Donna has been looking for ways to pay less tax and a friend of hers has suggested that she take advantage of the lower tax brackets of her husband and children. With $100,000 of extra cash in her bank account she is considering the following options and would like your advice as her accountant. Assume the following combined tax rates:

Donna 53%

Don 41%

Danielle 25%

Susan

Transaction with Don (husband):

(1) Loan the $100,000 to her husband at 0% interest. He would invest it in a bond earning 3%.

(2) Give the $100,000 to her husband. He would invest it in a bond earning 3%.

Transaction with Susan (minor child):

(3) Loan the $100,000 to her 15-year-old daughter at 0% interest. She would invest it in a bond earning 3%.

(4) Give the $100,000 to her 15-year-old daughter. She would invest it in a bond earning 3%.

Transaction with Danielle (adult child):

(5) Loan the $100,000 to her 25-year-old daughter at 0% interest. She would invest it in a bond earning 3%.

(6) Give the $100,000 to her 25-year-old daughter. She would invest it in a bond earning 3%.

REQUIRED:

Provide your advice to Donna about the tax implications of each transaction and let her know what you would do.