Concept Review 3.4- Future Value of a Tax Savings Please turn to page 152 of the text and complete Financial Problem 14. On December 30, you decide to make a $2,500 charitable donation. If you are in the 24% tax bracket and you expect to itemize your deductions, how much will you save in taxes for the current year?

Concept Review 3.4- Future Value of a Tax Savings Please turn to page 152 of the text and complete Financial Problem 14. On December 30, you decide to make a $2,500 charitable donation. If you are in the 24% tax bracket and you expect to itemize your deductions, how much will you save in taxes for the current year?

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion

Section: Chapter Questions

Problem 44P: LO.3, 4 Jabari Johnson is considering acquiring an automobile at the beginning of 2020 that he will...

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LO.3, 4 Jabari Johnson is considering acquiring an automobile at the beginning of 2020 that he will use 100% of the time as a taxi. The purchase price of the automobile is 48,000. Johnson has heard of cost recovery limits on automobiles and wants to know how much of the 48,000 he can deduct in the first year. Write a letter to Jabari in which you present your calculations. Also prepare a memo for the tax files, summarizing your analysis. Johnsons address is 100 Morningside, Clinton, MS 39058.
Comprehensive The following are three independent situations: 1. K. Herrmann has decided to set up a scholarship fund for students. She is willing to deposit 5,000 in a trust fund at the end of each year for 10 years. She wants the trust fund to then pay annual scholarships at the end of each year for 30 years. 2. Charles Jordy is planning to save for his retirement. He has decided that he can save 3,000 at the end of each year for the next 10 years, 5,000 at the end of each year for Years 11 through 20, and 10,000 at the end of each year for Years 21 through 30. 3. Patricia Karpas has 200,000 in savings on the day she retires. She intends to spend 2,000 per month traveling around the world for the next 2 years, during which time her savings will earn 18%, compounded monthly. For the next 5 years, she intends to spend 6,000 every 6 months, during which time her savings will earn 12%, compounded semiannually. For the rest of her life expectancy of 15 years, she wants an annuity to cover her living costs. During this period, her savings will earn 10% compounded annually. Assume that all payments occur at the end of each period. Required: 1. In Situation 1, how much will the annual scholarships be if the fund can earn 6%? How much at 10%? 2. In Situation 2, (a) How much will Charles have at the end of 30 years if his savings can earn 10%? How much at 6%? (b) If Charles expects to live for 20 years in retirement, how much can he withdraw from his savings at the end of each year if his savings earn 10%? How much at 6%? (c) How much would Charles need to invest today to have the same amount available at the time he retires as calculated in Situation 2(a) at 10%? How much at 6%? 3. In Situation 3, how much will Patricias annuity be?
f2. Subject :- Accounting A donor wants to fund a growing perpetuity that will pay $14,164 per year to a local museum, starting next year. She wants the annual amount paid to the museum to grow by 5% per year. Given that the interest rate is 9%, how much does she need to fund this perpetuity? Please use EXCEL
To be sure that you understand how to use the tables in Appendix A at the end of this book, solve the following exercises. Ignore income tax considerations. The correct answers, rounded to the nearest dollar, appear on page 855. Q.You have just turned 65 and an endowment insurance policy has paid you a lump sum of $400,000. If you invest the sum at 6%, how much money can you withdraw from your account in equal amounts at the end of each year so that at the end of 7 years (age 72), there will be nothing left?
To be sure that you understand how to use the tables in Appendix A at the end of this book, solve the following exercises. Ignore income tax considerations. The correct answers, rounded to the nearest dollar, appear on page 855. Q.You have estimated that for the first 6 years after you retire you will need a cash inflow of $48,000 at the end of each year. How much money do you need to invest at 4% at your retirement age to obtain this annual cash inflow? At 6%?
Answer each of the following independent questions. Ignore personal income taxes. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Suppose you invest $4,100 in an account bearing interest at the rate of 10 percent per year. What will be the future value of your investment in five years? 2. Your best friend won the state lottery and has offered to give you $11,600 in four years, after he has made his first million dollars. You figure that if you had the money today, you could invest it at 8 percent annual interest. What is the present value of your friend’s future gift? 3. In four years, you would like to buy a small cabin in the mountains. You estimate that the property will cost you $68,500 when you are ready to buy. How much money would you need to invest each year in an account bearing interest at the rate of 4 percent per year in order to accumulate the $68,500 purchase price? 4. You have estimated that your educational expenses…
Please anwser question 3 but use question 2 to help answer question 3. 2. You took an amazing class at the U that changed your life, so now you are going to invest for your retirement. Your tax bracket is 25% federal and 5% state. Your investment is in a federally and state tax free account that earns 11% each year, what interest rate are you effectively earning on your investment? 3. How much will you have effectively earned if you invest $4,000 each year for the next 35 years (please use the rate you got in question 2)?
Economic Q) You start a savings account (Tax Free) on your 20th birthday – You earn 7% interest on the balance – compounded monthly 1. From age 20 – 35 – You deposit $25 monthly 2. From age 35 – 50, you deposit $100 monthly 3. From age 50 – 65 you deposit $200/month a. How much money will you have at age 65? If you were to draw money out – to use it all (while still getting 7% interest) to age 90 – What would your monthly income be? It's better to show how this can be solved using Excel. Thank you!
Congratulation! You are the winning entry in the OSC Sweepstakes. As the lucky winner you receive the opportunity to receive one of the following three prize packages: A $25,000 lump sum payment today; A $4,000 payment today and a $22,500 payment one year from now; A $9,000 payment at the end of this year and a $20,000 payment at the end of the next year. You may assume that all payments are quoted in after-tax dollars. a.) If the interest rate is 7% and inflation is expected to be zero over the next two years, which of the above three options would you choose? Why? b.) If the interest rate is actually 10%, which option would you choose? Would your choice be different than the choice you made in part a? QUESTION 2