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Tax Liability Decreases Due to Investment

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Jerome is considering making a $30,000 investment in a venture which its promoter promises will generate immediate tax benefits for him. Jerome, who does not anticipate itemizing his deductions, is in the 30% marginal tax bracket. If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure, by how much will Jerome's tax liability decline because of the investment?

a. $-0-.

b. $9,000.

c. $12,000.

d. $30,000.

e. None of the above.

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Quick calculations shown and explained to work out how investing will lower Jerome's tax liabilities.

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If the investment is of a type that produces a tax credit of 40% of the amount ...

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