Mr. and Mrs. TB are going through an amicable divorce. Mrs. TB, who is a full-time homemaker, will have custody of their two children, ages 2 and 4. She suggested that Mr. TB pay $4,000 child support each month. He countered by offering to pay $1,600 child support and $3,000 alimony each month if he can claim their two children as dependents. In either case, Mrs. TB will qualify as a head of house-hold. Mr. TB's taxable income averages $150,000, putting him in the 28 percent marginal tax bracket.
a. Compute Mr. TB's annual after tax cost and Mrs. TB's annual after tax cash ‚if he pays her $4,000 monthly child support and she claims their children as dependents.
b. Compute Mr. TB's annual after tax cost and Mrs. TB's annual after tax cash ‚if she accepts his counter proposal.