23 Nov Early next year, Kate and Sam Smith will inherit $200,000.? Kate and Sam are trying to decide how to invest this money and have asked you, their tax accountant, to look into some potential inv
The complete Writing Project and Presentation is found in Getting Started. Upload the portion of the project due this week.
Requirements:
Writing, using software, and interpreting results is a large part of your learning experience. These assignments are designed to improve your use of technology and communication skills. Using proper business English and resources from the library you will comment and share your research with your classmates. Make sure you note your source in proper APA format.
Project Information:
You are a manager at a local accounting firm, and Kate and Sam Smith are your clients. It is the end of the year, and they have come to ask your advice on some tax planning strategies, as well as help preparing their tax return.
Week 1 Writing Assignment Part 1:
This project is split into four (4) parts with one (1) part due each week of the course. Based on your readings, use of technology, research of literature, and other sources do the following:
Week 1: Early next year, Kate and Sam Smith will inherit $200,000. Kate and Sam are trying to decide how to invest this money and have asked you, their tax accountant, to look into some potential investment opportunities. Please see the attached excel spreadsheet, where you will complete the annual after-tax rates of return column for each investment opportunity you have identified. Include a paragraph on the spreadsheet where you list the three basic tax planning strategies, and the features of taxation each of them exploits.
Due Dates: This project is completed over several weeks so be sure to follow the due dates carefully.
Grading Rubric: Please refer to the grading rubric specific requirements.
Criteria
Points
Description
Content/Use of Software
0-85
Thoroughness: The software document contains related material for the topic assigned. Appropriate formulas, functions, commands, and other features of the assigned software are used to obtain accurate solutions. The report(s) submitted from the software demonstrates an understanding of the use of the software. Timeliness: Assignment submitted by the assigned due date.
Formatting
0-15
The software documents are logically organized and formatted properly for a professional look.
Library Assistance
Link to Keiser's elibrary resources: http://kesu-verso.auto-graphics.com/MVC/
PowerPoint instruction on how to use the Keiser elibrary: Keiser Slide show Library-Orientation-login-and-navigate-lesson1.pptx Keiser Slide show Library-Orientation-login-and-navigate-lesson1.pptx – Alternative Formats
Guidance on how to log in and use the Keiser elibrary: KU Library login guide2014October3.pdf KU Library login guide2014October3.pdf – Alternative Formats
How to cite work from the library: How to cite work from the library.docx How to cite work from the library.docx – Alternative Formats
This link helps with APA format: https://owl.purdue.edu/owl/research_and_citation/apa_style/apa_formatting_and_style_guide/general_format.html
Graded Activity:
Click on Getting Started to review the requirements for the writing project. Then click the title link above labeled "Week 1 Writing Project – Part 1" to upload part 1 of the writing project.
Sheet1
| Name: | ||||
| Kate and Sam Smith Investment Opportunities | ||||
| Here are the three different investment opportunities you have identified for the Smiths, all with the same amount of risk: | ||||
| 1. | Taxable corporate bonds that pay 4.75 percent interest annually. | |||
| 2. | A high-dividend stock that pays 4 percent dividends annually but has no appreciation potential. | |||
| 3. | Tax-exempt municipal bonds that pay 3.5 percent annually. | |||
| Kate and Sam have a marginal tax rate of 30 percent (capital gains rate of 15 percent). | ||||
| Investment Choice | Computation | After-Tax Return | ||
| 1. | Corporate Bond | |||
| 2. | High-dividend stock | |||
| 3. | Municipal bond | |||
| Here are the three basic tax planning strategies, and the features of taxation each of them exploits: |
,
Kate Smith (SS # 555-55-5555) Sam Smith (SS# 444-44-4444)
33 Oak Street Drive San Diego, California 91911
The taxpayers are 52 years old, file Married Filing Jointly, and have two children:
Elizabeth Smith (SS # 333-33-3333) Jonathan Smith (SS# 222-22-2222).
For this problem, assume their gross income is $185,300.
This year Kate got a new job, and the Smiths moved to a new city. The new job was located within the same state about 650 miles away from their old house. Before the move, the family went on a house hunting trip that cost them $700. They also hired a moving company for $2,800. On their way to their new house they spent $50 on meals, and $75 on a hotel room. They also stopped by an amusement park and spent $80 on tickets for the day.
The Smiths paid $12,000 in interest on their home mortgage this year, and $2,500 in real estate taxes on their new home. They also paid $1,200 in personal credit card interest, and Kate paid $850 in interest on student loans.
Sam was hospitalized with a heart condition this year, which required him to undergo surgery. The Smiths incurred $25,000 in medical expenses as a result of Sam’s illness. Of this amount, $18,000 was reimbursed by the insurance company.
During the year the Smiths contributed $1,500 cash to the Salvation Army. Before their move, the family donated clothes and furniture that they had purchased for $650 to Goodwill. At the time of donation the items were worth $300. They also gave some old baby furniture to their friends that was valued at $150.
Sam Smith paid $200 in union dues for the year, and the family pays $250 for tax return preparation services.
Answer Key – After TCJA
Taxable income is $161,300, computed as follows:
Gross Income $ 185,300
AGI $185,300
Itemized Deductions: Medical Expenses 0 Mortgage Interest 12,000 Real Estate Taxes 2,500 Charitable Contributions 1,800
16,300**
Standard Deduction:
Married Filing Jointly $24,000
Taxable income $ 161,300
Notes:
1. None of the moving expenses are deductible.
2. Student loan interest is not deductible because the Smith’s AGI exceeds the threshold amount of income.
3. Personal credit card interest is not deductible.
4. Medical expenses do not exceed the floor limitation of 10 percent of AGI so are non-deductible.
5. The Smith’s can deduct the $1,500 cash donation, and the $300 of items contributed to Goodwill. They cannot deduct the furniture given to their friends.
6. Union dues of $200 and tax return preparation fees of $250 are no longer deductible.
** Total itemized deductions are not as high as the standard deduction. Therefore, this year the client should take the standard deduction.
