client who is in his 70's. in 2020, he incurred significant capital losses in the amount of $65,000 because he sold some stocks when the stock market fell as a result of the pandemic. Because my client's losses are investment losses (and therefore capital), he can only deduct $3,000 per year against other income. With $65K in losses, it will take him more than 21 years to recover those losses. Since he is in his 70's, he may not live that long. What advice might you give him to use up

client who is in his 70's. in 2020, he incurred significant capital losses in the amount of $65,000 because he sold some stocks when the stock market fell as a result of the pandemic. Because my client's losses are investment losses (and therefore capital), he can only deduct $3,000 per year against other income. With $65K in losses, it will take him more than 21 years to recover those losses. Since he is in his 70's, he may not live that long. What advice might you give him to use up

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter11: Invest Or Losses

Section: Chapter Questions

Problem 39P

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Carlos opens a dry cleaning store during the year. He invests 30,000 of his own money and borrows 60,000 from a local bank. He uses 40,000 of the loan to buy a building and the remaining 20,000 for equipment. During the first year, the store has a loss of 24,000. How much of the loss can Carlos deduct if the loan from the bank is nonrecourse? How much does Carlos have at risk at the end of the first year?
A 55 year old executive is considering retiring and asks your opinion whether it would be better for him to gift $500,000 ( in cash) to his only daughter or invest the $500,000 and bequeath the $500,000 plus earnings to his daughter in his will. The executive is healthy and expects to live at least another 20 years. His entire estate is expected to be in excess of the exclusion amount. What advice would you give the executive? Explain your reasoning including any assumptions as to taxes, earnings rates on investments, spending patterns, potential changes in tax law, and so on. Would your answer be different if he wanted to give stock which has significantly appreciated since he purchased it? In the alternative, how might the annual gift tax exclusion be used to transfer value to his daughter?
Your father's employer was just acquired, and he was given a severance payment of $375,000, which he invested at a 7.5% annual rate. He now plans to retire, and he wants to withdraw $35,000 at the end of each year, starting at the end of this year. How many years will it take to exhaust his funds, i.e., run the account down to zero?
Amrit has over 20 years of experience and earns £95,000 in wages in the 2020/2021 tax year. Over the years, he has invested his extra savings in buying shares in various firms. In this calendar year, he is expected to receive a total dividend of £7,500. Out of the total dividends, £1,500 are from ISAs. In July 2020, Amrit sadly loses his mother to Covid-19. Amrit's mother left a will which states that £50,000 of her estate should be bequeathed to Cancer Research UK, a charitable institution, with the remainder of her wealth to be bequeathed to Amrit. Moreover, Amrit's mum had £75,000 as ISA and £350,000 in her current account Question Please calculate the tax paid by Amrit. (Explain all the steps and assumptions(rules) in your calculations) thanks
Your uncle is ready to retire and head for the hills, so he says to you: “Look, I own 500 shares of stock in Startup, Inc. I’m ready to cash out, so I’ll sell it to you for the very same $25,000 I paid for it back in 2012. And, by the way, it’s qualified small business stock, so you’re completely protected on the downside – even if the company went under, you would get 100% tax cushion for the loss! What do you say…???” On its face, what’s wrong with this offer?
Natalie expects her ordinary income to exceed $600,000 putting her in the 37 marginal percent tax bracket for 2019. So far this year, she has a $5,000 short-term capital loss. As of June 1, she is holding 1,000 shares of Dritco stock purchased on June 15 of last year for $15,000. The market value of the stock as of May 21 is $27,000. Lately the value of the stock has been decreasing and Natalie feels it may go down by $1,000 or so in the next month and probably stabilize thereafter. Advise Natalie as to the various courses of action she might take
Daniel is considering selling two stocks that have not fared well over recent years. A friend recently informed Daniel that one of his stocks has a special designation, which allows him to treat a loss up to $72,000 on this stock as an ordinary loss rather than the typical capital loss. Daniel figures that he has a loss of $86,400 on each stock. If Daniel’s marginal tax rate is 35 percent and he has $172,800 of other capital gains (taxed at 15 percent), what is the tax savings from the special tax treatment?
Joseph Jones, a manager at Computer Science, Inc. (CSI), received 10,000 shares of company stock as part of his compensation package. The stock currently sells at $40 a share. Joseph would like to defer selling the stock until the next tax year. In January, however, he will need to sell all his holdings to provide for a down payment on his new house. Joseph is worried about the price risk involved in keeping his shares. At current prices, he would receive $400,000 for the stock. If the value of his stock holdings falls below $350,000, his ability to come up with the necessary down payment would be jeopardized. On the other hand, if the stock value rises to $450,000, he would be able to maintain a small cash reserve even after making the down payment. Joseph considers three investment strategies:a. Strategy A is to write January call options on the CSI shares with strike price $45. These calls are currently selling for $3 each.b. Strategy B is to buy January put options on CSI with…
Joseph Jones, a manager at Computer Science, Inc. (CSI), received 10,000 shares of company stock as part of his compensation package. The stock currently sells at $40 a share. Joseph would like to defer selling the stock until the next tax year. In January, however, he will need to sell all his holdings to provide for a down payment on his new house. Joseph is worried about the price risk involved in keeping his shares. At current prices, he would receive $40,000 for the stock. If the value of his stock holdings falls below $35,000, his ability to come up with the necessary down payment would be jeop- ardized. On the other hand, if the stock value rises to $45,000, he would be able to maintain a small cash reserve even after making the down payment. Joseph considers three investment strategies: a. Strategy A is to write January call options on the CSI shares with strike price $45. These calls are currently selling for $3 each. Strategy B is to buy January put options on CSI with…
Kaan, a 55-year-old software engineer, earned a pre-tax income of $200,000 in 2024. He plans to quit his current job in 10 years to start his own business. Kaan already holds several accounts with RBC but intends to open new TFSA, RRSP, and non-registered investment accounts with TD Bank. He will allocate funds in TD Bank for his business venture while reserving funds in RBC for emergencies and retirement. Kaan has the capacity to save $100,000 annually in real, before tax dollars and will only deposit to TD bank accounts from now on until retirement. His savings strategy includes contributions to a TFSA, RRSP, and non-registered investment account at TD Bank. In 2024, he will contribute to the TFSA up to the 2024 annual limit, with contributions increasing annually to match the inflation rate. The RRSP contribution remains fixed at $20,000 in real dollars due to employer contributions. Any remaining savings are directed to the non-registered investment account. Contributions occur at…
Kaan, a 55-year-old software engineer, earned a pre-tax income of $200,000 in 2024. He plans to quit his current job in 10 years to start his own business. Kaan already holds several accounts with RBC but intends to open new TFSA, RRSP, and non-registered investment accounts with TD Bank. He will allocate funds in TD Bank for his business venture while reserving funds in RBC for emergencies and retirement. Kaan has the capacity to save $100,000 annually in real, before tax dollars and will only deposit to TD bank accounts from now on until retirement. His savings strategy includes contributions to a TFSA, RRSP, and non-registered investment account at TD Bank. In 2024, he will contribute to the TFSA up to the 2024 annual limit, with contributions increasing annually to match the inflation rate. The RRSP contribution remains fixed at $20,000 in real dollars due to employer contributions. Any remaining savings are directed to the non-registered investment account. Contributions occur at…
Sam is currently 30 years of age. He owns his own business and wants to retire at the age of 60. He has little confidence in the Social Security system. He wants to retire with an annual income of $72,000. a. If Sam believes he will live to age 90, how much does he have to accumulate by the time he reaches age 60 to receive $72,000 at the end of each year for the rest of his life? Sam believes he can earn 8 percent on his money in a stock mutual fund. $810,560.40 b. How much does he have to accumulate if he wants the payment of $72,000 at the beginning of each year? $875,405.23 c. What dollar amount of interest will Sam have earned during retirement if he receives his $72,000 at the beginning of each year?