Investments Assignment Paper

1. [LO 2] Three years ago, Adrian purchased 100 shares of stock in X Corp. for $10,000. On December 30 of year 4, Adrian sells the 100 shares for $6,000.

a. Assuming Adrian has no other capital gains or losses, how much of the loss is Adrian able to deduct on her year 4 tax return?

b. Assume the same facts as in part a, except that on January 20 of year 5, Adrian purchases 100 shares of X Corp. stock for $6,000. How much loss from the sale on December 30 of year 4 is deductible on Adrian’s year 4 tax return? What basis does Adrian take in the stock purchased on January 20 of year 5?

2. [LO 2] Christopher sold 100 shares of Cisco stock for $5,500 in the current year. He purchased the shares several years ago for $2,200. Assuming his marginal ordinary income tax rate is 28 percent, and he has no other capital gains or losses, how much tax will he pay on this gain? Investments Assignment Paper

3. [LO 2] Christina, who is single, purchased 100 shares of Apple Inc. stock several years ago for $3,500. During her year-end tax planning, she decided to sell 50 shares of Apple for $1,500 on December 30. However, two weeks later, Apple introduced its latest iPhone, and she decided that she should buy the 50 shares (cost of $1,600) of Apple back before prices skyrocket.

a. What is Christina’s deductible loss on the sale of 50 shares? What is her basis in the 50 new shares?

b. Assume the same facts, except that Christina repurchased only 25 shares for $800. What is Christina’s deductible loss on the sale of 50 shares? What is her basis in the 25 new shares?

4. [LO 2] {Research}Arden purchased 300 shares of AMC common stock several years ago for $1,500. On April 30, Arden sold the shares of AMC common for $500 and then purchased 250 shares of AMC preferred stock two days later for $700. The AMC preferred stock is not convertible into AMC common stock. What is Arden’s deductible loss from the sale of the 300 shares of AMC common stock? Investments Assignment Paper

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5. [LO 2] {Planning} Shaun bought 300 shares of Dental Equipment, Inc. several years ago for $10,000. Currently the stock is worth $8,000. Shaun’s marginal tax rate this year is 25 percent, and he has no other capital gains or losses. Shaun expects to have a marginal rate of 30 percent next year, but also expects to have a long-term capital gain of $10,000. To minimize taxes, should Shaun sell the stock on December 31 of this year or January 1 of next year (ignore the time value of money)?

6. [LO 2] {Planning} Irene is saving for a new car she hopes to purchase either four or six years from now. Irene invests $10,000 in a growth stock that does not pay dividends and expects a 6 percent annual before-tax return (the investment is tax deferred). When she cashes in the investment after either four or six years, she expects the applicable marginal tax rate on long-term capital gains to be 25 percent.

a. What will be the value of this investment four and six years from now?

b. When Irene sells the investment, how much cash will she have after taxes to purchase the new car (four and six years from now)?

7. [LO2] {Planning} Komiko Tanaka invests $12,000 in LymaBean, Inc. LymaBean does not pay any dividends. Komiko projects that her investment will generate a 10 percent before-tax rate of return. She plans to invest for the long term.

a. How much cash will Komiko retain, after-taxes, if she holds the investment for 5 years and then she sells it when the long-term capital gains rate is 15 percent? Investments Assignment Paper

b. What is Komiko’s after-tax rate of return on her investment in part (a)?

c. How much cash will Komiko retain, after-taxes, if she holds the investment for 5 years and then sells when the long-term capital gains rate is 25 percent?

d. What is Komiko’s after-tax rate of return on her investment in part (c)?

e. How much cash will Komiko retain, after taxes, if she holds the investment for 15 years and then she sells when the long-term capital gains rate is 15 percent?

f. What is Komiko’s after-tax rate of return on her investment in part (e)?

8. [LO 2] {Research} Becky recently discovered some high-tech cooking technology that has advantages over microwave and traditional ovens. She received a patent on the technology that gives her exclusive rights to the technology for 20 years. Becky would prefer to retain the patent, but she doesn’t want to deal with the manufacturing and marketing of the technology. She was able to reach a compromise. A little over a year after she secured the patent, Becky signed a contract with DEF Company giving DEF control to manufacture and market the technology. In exchange, Becky is to receive a royalty based on the sales of the technology. For tax purposes, Becky is not sure how to treat her arrangement with DEF. If the exchange with DEF is treated as a sale, she will recognize long-term capital gain because the patent is a capital asset held for more than a year. If the exchange is not treated as a sale, Becky will recognize ordinary income as she receives the royalties. (Hint: IRC §1235)

a. Is it possible for Becky to treat the exchange with DEF as a sale even though she never relinquishes actual title of the patent? If so, what requirements must she meet to treat the contract as a sale for tax purposes?

b. Does your answer to the question above change if Becky’s contract with DEF gave DEF Company control over the income from the patent for the next 10 years of the patent’s remaining 19-year life?

9. [LO 3] {Planning} The Johnsons recently decided to invest in municipal bonds because their marginal tax rate is 40 percent. The return on municipal bonds is currently 3.5 percent and the return on similar taxable bonds is 5 percent. Compare the after-tax returns of the municipal and taxable bonds. Investments Assignment Paper

a. Which type of bond should the Johnsons select?

b. What type of bond should the Johnsons select if their marginal tax rate was 20 percent?

c. At what marginal tax rate would the Johnsons be indifferent between investing in either taxable or municipal bonds?

10. [LO 3] Lynette VanWagoner purchased a life insurance policy to insure her mother Idon. Idon is currently 64. Insurance companies predict that women in her condition will live, on average, to be 81 years old. Lynette makes a one-time payment of $100,000 to purchase a life insurance policy on Idon’s life. The policy provides for a $1,000,000 death benefit and a cash surrender value equal to the original $100,000 premium plus a 7 percent annual rate of return on the premium.

a. How much will Lynette receive after taxes if Idon dies in 14 years?

b. How much will Lynette receive after taxes if Idon dies in seven years?

c. How much will Lynette receive after taxes if Lynette decides to cash in the policy after four years when Idon is still living and Lynette’s marginal tax rate is 28 percent?

11. [LO 3] Ben recently made a one-time investment of $20,000 in the Florida 529 educational savings plan for his three-year-old son, Mitch. Assume the plan yields a constant 6 percent return for the next 15 years. Investments Assignment Paper

a. How much money will be available for Mitch after taxes when he begins college at age 18?

b. Assume, instead, that when Mitch turns 18, he decides to forego college and spend his time as a traveling artist. If Mitch’s parents give him the amount in the 529 plan to pursue his dreams, how much will he keep after taxes if his marginal tax rate is 10 percent?

12. [LO 4] Rich and Shauna Nielson file a joint tax return, and they itemize deductions. Assume their marginal tax rate on ordinary income is 25 percent. The Nielsons incur $2,000 in miscellaneous itemized deductions, excluding investment expenses. They also incur $1,000 in noninterest investment expenses during the year. What tax savings do they receive from the investment expenses under the following assumptions:

a. Their AGI is $90,000.

b. Their AGI is $130,000.

13. [LO 4] Mickey and Jenny Porter file a joint tax return, and they itemize deductions. The Porters incur $2,000 in employment-related miscellaneous itemized deductions. They also incur $3,000 of investment interest expense during the year. The Porters’ income for the year consists of $150,000 in salary, and $2,500 of interest income.

a. What is the amount of the Porters’ investment interest expense deduction for the year?

b. What would their investment interest expense deduction be if they also had a ($2,000) long-term capital loss?

14. [LO 4] {Planning} On January 1 of year 1, Nick and Rachel Sutton purchased a parcel of undeveloped land as an investment. The purchase price of the land was $150,000. They paid for the property by making a down payment of $50,000 and borrowing $100,000 from the bank at an interest rate of 6 percent per year. At the end of the first year, the Suttons paid $6,000 of interest to the bank. During year 1, the Suttons only source of income was salary. On December 31 of year 2, the Suttons paid $6,000 of interest to the bank and sold the land for $210,000. They used $100,000 of the sale proceeds to pay off the $100,000 loan. The Suttons itemize deductions and are subject to a marginal ordinary income tax rate of 35 percent.

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a. Should the Suttons treat the capital gain from the land sale as investment income in year 2 in order to minimize their year 2 tax bill? If so, how much?

b. How much does this cost or save them in year 2?

15. [LO 4] {Research} George recently received a great stock tip from his friend, Mason. George didn’t have any cash on hand to invest, so he decided to take out a $20,000 loan to facilitate the stock acquisition. The loan terms are 8 percent interest with interest-only payments due each year for five years. At the end of the five-year period the entire loan principal is due. When George closed on the loan on April 1, 2014, he decided to invest $16,000 in stock and to use the remaining $4,000 to purchase a four-wheel recreation vehicle. George is unsure how he will treat the interest paid on the $20,000 loan. In 2014, George paid $1,200 interest expense on the loan. For tax purposes, how should he treat the 2014 interest expense? (Hint: visit www.irs.gov and consider IRS Publication 550)

16. [LO5] Larry recently invested $20,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is also $20,000. In addition, Larry’s share of the limited partnership loss for the year is $2,000, his share of income from a different limited partnership was $1,000, and he had $3,000 of dividend income from the stock he owns. How much of Larry’s $2,000 loss from the limited partnership can he deduct in the current year?

17. [LO5] Rubio recently invested $20,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is $15,000. In addition, Rubio’s share of the limited partnership loss for the year is $22,000, his share of income from a different limited partnership was $5,000, and he had $40,000 in wage income and $10,000 in long-term capital gains. Investments Assignment Paper

a. How much of Rubio’s $22,000 loss can he deduct considering only the tax basis limitation?

b. How much of the loss from part a. can Rubio deduct under the at-risk limitations?

c. How much of Rubio’s $22,000 loss from the limited partnership can he deduct in the current year considering all limitations?

18. Molly Grey (single) acquired a 30 percent limited partnership interest in Beau Geste LLP several years ago for $48,000. At the beginning of year 1, Molly has tax basis and an at-risk amount of $20,000. In year 1, Beau Geste incurs a loss of $180,000 and does not make any distributions to the partners.

· In year 1, Molly‘s AGI (excluding any income or loss from Beau Geste) is $60,000. This includes $10,000 of passiveincomefrom other passive activities.

· In year 2, Beau Geste earns income of $30,000. In addition, Molly contributes an additional $30,000 to Beau Geste during year 2. Molly’s AGI in year 2 is $63,000 (excluding any income or loss from Beau Geste). This amount includes $8,000 in income from her other passive investments.

a. Based on the above information, determine the following amounts:

· At-risk amount at the end of year 1

· At-risk amount at the end of year 2

· Losses allowed under the at-risk rules in year 2

· Total suspended passive losses at the end of year 1

· Total suspended at-risk losses at the end of year 2

· Deductible losses in year 1

· Year 2 AGI after considering Beau Geste events

b. Briefly describe actions Molly Grey could undertake in year 2 to utilize any suspended passive losses from year 1.

19. [LO 5] Anwar owns a rental home and is involved in maintaining it and approving renters. During the year he has a net loss of $8,000 from renting the home. His other sources of income during the year were a salary of $111,000 and $34,000 of long-term capital gains. How much of Anwar’s $8,000 rental loss can he deduct currently if he has no sources of passive income? Investments Assignment Paper

The Canadian pharmaceutical industry pays doctors and health-care organizations tens of millions of dollars a year for a variety of services. Doctors are paid for giving speeches, acting as consultants, spearheading treatment clinical trials, and teaching medical- education courses, and are reimbursed for travel expenses. Health-care organizations such as hospitals and university medical faculties also receive funding.

There has been considerable concern expressed about this practice, even from within the medical profession, as conflicts of interest are possible. Some studies have found a link between the payments and prescriptions. In response, Innovative Medicines Canada has attempted to self regulate by implementing a voluntary framework on disclosure of payments. Innovative Medicines Canada represents the 45 Arms who discover, develop, and deliver innovative medicines and vaccines, also referred to as brand name pharmaceutical firms. Operations Management homework help

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Only 10 of the forms have endorsed the disclosure initiative. The information disclosed is not easily accessible as it is on the of the individual Arms and not easily found. Dollar amounts of the payments are disclosed but no names or reasons for the payments are given. Several prominent physicians and researchers have established Open Pharma to advocate for greater disclosure in the health-care system. Its mission is “Transparency to Protect Trust and Enhance Science.” The Canadian Medical Association (CMLA) Mac endorsed the need or greater transparency.

Canadian governments are reluctant to become involved. The federal government states that the issue is a provincial matter. Only two provinces are considering legislation to require disclosure: Ontario and British Columbia In the United States all payments over $10 must be disclosed with names. Similar to requirement in other countries. Critics claim that the innovative Medicines Canada initiative is a public-relations effort to stave over legislation and not to improve transparency. The CMA says that it is continuing to improve transparency.  Operations Management homework help

You have been assigned a corporation to analyze in this class.  Using the readings and resources provided this week, along with your own research, provide the following information for your assigned corporation:  You can find a lot of information from the firm’s annual report.  Additionally you can use Yahoo finance.com or Mergentonline.com (used through the Wilmu library system).

• What financial market, NYSE or NASDAQ, is your assigned corporation listed on?  Why does it matter?
• Current Market Capitalization:
  • Using the provided excel template, show the calculation: Market Cap = Shares Outstanding times Stock Price
  • Define Mid-Cap and Large-Cap.  Which designation is your corporation?

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• Current Dividend Yield:
  • Using the provided excel template, show the calculation: Dividend Yield = Annual Dividend divided by Stock Price
  • Provide an example of the current savings rate at a bank.  Does your corporation pay a higher rate for their dividend yield?  Knowing that stocks are riskier than savings accounts, defend or support the current dividend yield.  Provide at least ½ page. Accounting homework help
• CEO Pay Trend
  • Provide a five-year trend of the CEO pay for your corporation.  In your opinion, in your own words, provide at least one full page that defends or criticizes the trend in CEO pay.
• Debt to Equity Ratio:
  • What is the debt (bonds) to equity (stocks) ratio of your assigned corporation for the past 5 years (no calculation needed just cite a reliable source)?
  • Using the five-year trend above, what is your assigned corporation’s current condition of the ’right-hand’ side of the balance sheet in terms of total debt to total equity of the firm?  In other words, provide and analyze the debt to equity ratio.  Provide at least ½ page. Accounting homework help

You have been assigned a corporation to analyze in this class.  Using the readings and resources provided this week, along with your own research, provide the following information for your assigned corporation:  You can find a lot of information from the firm’s annual report.  Additionally you can use Yahoo finance.com or Mergentonline.com (used through the Wilmu library system).

• What financial market, NYSE or NASDAQ, is your assigned corporation listed on?  Why does it matter?
• Current Market Capitalization:
  • Using the provided excel template, show the calculation: Market Cap = Shares Outstanding times Stock Price
  • Define Mid-Cap and Large-Cap.  Which designation is your corporation?
• Current Dividend Yield:
  • Using the provided excel template, show the calculation: Dividend Yield = Annual Dividend divided by Stock Price
  • Provide an example of the current savings rate at a bank.  Does your corporation pay a higher rate for their dividend yield?  Knowing that stocks are riskier than savings accounts, defend or support the current dividend yield.  Provide at least ½ page. Accounting homework help

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• CEO Pay Trend
  • Provide a five-year trend of the CEO pay for your corporation.  In your opinion, in your own words, provide at least one full page that defends or criticizes the trend in CEO pay.
• Debt to Equity Ratio:
  • What is the debt (bonds) to equity (stocks) ratio of your assigned corporation for the past 5 years (no calculation needed just cite a reliable source)?
  • Using the five-year trend above, what is your assigned corporation’s current condition of the ’right-hand’ side of the balance sheet in terms of total debt to total equity of the firm?  In other words, provide and analyze the debt to equity ratio.  Provide at least ½ page. Accounting homework help