Reference no: EM133150263

Question - Earl and Olivia Nelson Mini-Case Study: Earl is age 48, and is a district vice president of a tool store and is fully vested in the company's pension plan. Olivia, age 40, is the president and majority shareholder of a temporary service employment agency. She is an active participant in the company's retirement plan. They have 3 children: Earl Jr, age 17, Kelly, age 12, and Ned, age 8. Their income: Earl's salary $95,000, Olivia's salary $82,100, interest from savings account $438, short-term capital gains $2,100, qualified dividend interest $20,884. Expenses: IRA contributions $5,500 each, political contributions $750, state and local income taxes $6,948, real estate taxes $1,337, general sales tax $500, sales tax on motor vehicle $1,225, home mortgage interest $17,600, consumer interest $2,374, charitable contributions $3,902, tax return preparation fees $300, and investment adviser fees $500. Other information: Olivia won a $1,000 shopping spree at the local grocery store. Earl was forgiven a debt of $500. They had child care expenses over $7,200 for Kelly and Ned. What are some tax planning methods the Nelsons used to manage their tax liability effectively?