Reference no: EM131234247
Assignment : Tax Issues Associated with Financial Planning
Understanding the tax consequences of your financial planning decisions is very important. These decisions may sometimes have life-long consequences in addition to a one-time result.
For example, when a person decides to save for retirement, there are tax consequences for each year when money is added to the account as well as when it grows. There are additional consequences later when that person decides to retire and use the money to live on.
This assignment looks at another example of tax issues associated with financial planning. You will look at the use of tax-exempt investment instruments such as municipal bonds, as an alternative to traditional investments, and corporate bonds or stocks.
Consider the following:
Bill Smith, a manager of a restaurant/bar in Los Angeles, is in the 25% marginal tax bracket and pays an additional 5% in taxes to the state of California. Bill has $20,000 invested in corporate bonds which is currently earning an average annual return of 7.5%.
Additionally, Bill also has another $20,000 invested in municipal bonds from the city of Los Angeles that are being used to redevelop depressed areas downtown. These bonds pay an average return of 5.4%.
Assume that in both cases, Bill earns the same returns as calculated on both the corporate and municipal bonds each year for the next 15 years.
Answer the following:
What is the after-tax return on Bill's corporate bonds for the current year?
What is the after-tax return on his municipal bonds for the current year?
Which investment earns more returns: corporate or municipal bonds?
What would the balance in each account be at the end of the fifteenth year?
Present the calculations and answers in Excel spreadsheet format or in Word format. Write the interpretation of results in a Word document.
Apply APA standards to citation of sources.
|
Problem regarding the company analysis
: The following is a summary of performance data of FedEx over a three-year period:
|
|
What would you do to increase the utilization of the service
: What would you do to increase the utilization of these services and attract a greater mix of paying patients? State at least four steps or actions you would take for this.
|
|
How you would develop and build a new team
: After reading the Klein, Diaz Granados, Salas, Le, Burke, Lyons, and Goodwin (2009) article and the textbook, integrate your own personal experience and explain how you would develop and build a new team that you were leading.
|
|
Notes payable-long-term debt and common stock
: The firm must maintain a current ratio of 2.3 and a debt ratio of 40%. How much financing will be obtained using notes payable, long-term debt and common stock?
|
|
What after-tax return on municipal bonds for current year
: What is the after-tax return on Bill's corporate bonds for the current year? What is the after-tax return on his municipal bonds for the current year? Which investment earns more returns: corporate or municipal bonds?
|
|
Medical expenses can emma claim as an itemized deduction
: Emma's adjusted gross income is $30,000. She has $5,200 in unreimbursed medical expenses. How much in medical expenses can Emma claim as an itemized deduction?
|
|
Estimate a five factor model
: Estimate a five factor model and - discuss any differences between your results and those reported in the paper.
|
|
Balance sheet of one of several identical banks
: Consider the balance sheet of one of several identical banks:
|
|
How do issues in economic areas impact primary care clinics
: What do you believe are the most critical competencies for a leader to possess? Provide at least one example to support your opinion. How do issues in the following areas, Economic, Political and Social, impact primary and urgent care clinics in th..
|