Tax Saving Strategies

Dan and Karen Burles have 2 children, Coy (age 12, student) and Roger (age 21, student). Dan and Karen own a security equipment sales and installation business, an LLC. Dan and Karen are in the highest income tax bracket. They have a portfolio with $130,000 of municipal bonds (annual income $5,200), $80,000 of corporate bonds (annual income of $4,000), and $180,000 of growth stocks. Which of the following income-shifting techniques will result in the greatest income tax savings for the Burles family?

  1. Transfer $50,000 of the municipal bonds to Roger
  2. Transfer the corporate bonds to Coy
  3. Hire Roger to work at the security company over the summer, paying him wages of $7,000
  4. Assign 20% of the business income to Coy