Posted: December 20th, 2021

Finance – Multiple Tax Problems

1.Jacqueline Strauss, a 25-year-old personal loan officer at Second National Bank, understands the importance of starting early when it comes to saving for retirement. She has committed $3,000 per year for her retirement fund and assumes that she’ll retire at age 65.a.How much will she have accumulated when she turns 65 if she invests in equities and earns 8 percent on average?b.Jacqueline is urging her friend, Mike Goodman, to start his plan right away, too, because he’s 35. What would his nest egg amount to if he invested in the same manner as Jacqueline and he, too, retires at age 65? Comment on your findings.5.Explain how buying a variable annuity is much like investing in a mutual fund. Do you, as a buyer, have any control over the amount of investment risk to which you’re exposed in a variable annuity contract? Explain.1.David and Cheryl Allen are in their mid-30s and have two children, ages 8 and 5. They have combined annual income of $95,000 and own a house in joint tenancy with a market value of $310,000, on which they have a mortgage of $250,000. David has $100,000 in group term life insurance and an individual universal life policy for $150,000. However, the Allens haven’t prepared their wills. David plans to do one soon, but they think that Cheryl doesn’t need one because the house is jointly owned. As their financial planner, explain why it’s important for both David and Cheryl to draft wills as soon as possible.3.George Reed, 48 and a widower, and Debbie Moore, 44 and divorced, were married five years ago. They have children from their prior marriages, two children for George and one child for Debbie. The couple’s estate is valued at $1.4 million, including a house valued at $475,000, a vacation home in the mountains, investments, antique furniture that has been in Debbie’s family for many years, and jewelry belonging to George’s first wife. Discuss how they could use trusts as part of their estate planning, and suggest some other ideas for them to consider when preparing their wills and related documents.5.Althea has accumulated substantial wealth and plans to gift some of her wealth to her son Jamal. She is considering two assets: a beach house, which cost $150,000 20 years ago and now has a fair market value of $500,000; and stock in Rich Corporation, which cost her $400,000 5 years ago and now has a fair market value of $500,000. Prepare a memo advising Althea which property to give to Jamal. In your memo, consider two scenarios: one where Jamal sells the property and one where he does not.

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