The taxpayer's marginal federal & state tax rate is 25%. Which would the taxpayer prefer?

1.00 taxable income rather than 1.25 tax-exempt income.

1.00 taxable income rather than 1.00 tax-exempt income

1.25 taxable income rather than 1.00 tax-exampt income

1.40 taxable income rather than 1.00 tax-exempt income

None