Roger is considering making a $6,000 investment in a venture that its promoter promises will generate immediate tax benefits for him. Roger, who does not anticipate itemizing his deductions, is in the 30% marginal income 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 Roger's tax liability decline because of the
investment?
a. $0
b. $1,800
c. $2,200
d. $2,400
e. None of the above
d
RATIONALE: The tax credit reduces Roger's tax liability by $2,400 ($6,000 × 40%).
Business
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