Financial Planning Part 1

Phyllis had three credit cards stolen. Before she realized they were stolen, the following amounts were already fraudulently charged

$50 each account

Jim and Betsy Grove want to take tax-free withdrawals from accounts established to pay for their daughter Candy's qualified education expenses when she attends college. Which of the following withdrawals would be taxable?

$6,000 from a Section 529 plan to pay for a car that Candy will use to commute to college her freshman year.

Income to U.S. taxpayers is taxed in the year it is derived in which of the following situations?

1. Interest earned but reinvested in a savings account in an FDIC savings bank.

Lanie is a single mom who has 3 children, ages 1, 5 and 9. While she is struggling a bit, she would like to pay for half of their education at a public college. The annual cost of education is currently $20,000 and has been increasing at 6% and is expected to continue. Her portfolio that was established for education has $25,000 in it and earns an average rate of return of 8%. If she would like to fund half of four years of college for each of the children, how much must she save each year at the end of the year, for the next nine years (round to the nearest $100)?

10700

Bruce, a single taxpayer, has been transferred by his company to Philadelphia. He sold his house for $650,000 and he had an adjusted basis of $330,000. He owned and lived in the home for 18 months. What is his capital gain from the sale of the personal residence?

132500

Sammy failed to file his tax return from a few years ago and pay the $5,000 tax liability that was owed at the time. Sammy's new tax advisor prepares and files the return in the current year, 21 and half months late. How much is total penalty

1675 5000(0.005)=550 5000(0.25)=1125

What is the present value of all college education for 5 children ages 0, 1, 1, 3, and 5 if the cost of education is today's dollars is $17,000 per year, education inflation is 5%, and the parents expected portfolio rate of return is 8.5%? The children are expected to be in college 4years and they will each start at age 18.

192007.89

Custodial arrangements are usually preferable to the direct transfer of property to a child to fund his or her education, for which of the following reasons?

2. Almost any type of property may be placed in a UTMA custodial account

Taxpayer must itemize deductions

2. Is married and files separate return 3. Taxpayer non resident alien

Calvin and Holly Burns want to plan for the education of their son, age 6. They want to invest so that they avoid taxes on the funds. What techniques will provide tax-free funds to finance both private school and college for the Burns' son?

2. Sec. 529 plan. 3. Municipal bonds in a UTMA account 4. Coverdell ESA.

Greg just received his student loan statement that indicates he paid $3,000 of interest on his student loan during the tax year. How much of the interest may he deduct?

2500

Greg just received his student loan statement that indicates he paid $3,000 of interest on his student loan during the tax year. How much of the interest may he deduct?

2500 AGI

Eddie Oliveri will be starting his freshman year of college this fall. The cost of attendance at the school he would like to attend is $37,000. The expected family contribution, as calculated from Eddie's FAFSA information, is $12,000. Eddie will receive a merit scholarship of $3,000 and expects to participate in a work-study program earning $5,000. What is the amount of Eddie's financial need as calculated in the federal financial aid formula?

25000 37000-12000=25000

Kim and Warren are both 67 years old and healthy. They are filing their tax return and want to know what their standard deduction amount will be. You correctly inform them that their standard deduction will be:

27000

What is the present value of the cost of college education for 4 children ages 1, 3, 5, and 7. The current cost of college is $25,000. The children will begin college at age 18 and be in college for 4 years. Education inflation is expected to be 6% and the parents portfolio rate of return is 8%.

299713.84 97,256.35694(4)=299713.84

Peter wants to save some money for his daughter Gwen's education. Tuition costs $12,500 per year in today's dollars. His daughter was born today and will go to school starting at age 18. She will go to school for 4 years. Peter can earn 11% on his investments and tuition inflation is 7%. How much must Peter save at the end of each year, if he wants to make his last savings payment at the beginning of his daughter's first year of college?

3176.43

George has been in academia his entire career and wholeheartedly believes that education is the key to success. He has two daughters, Cindy and Susie. Cindy is a lingerie and swimsuit model who also believes in education, as well as fashion. Cindy has two children, Red and Mauve, who are ages 4 and 2 today. She is also headed to the hospital at this very moment to deliver her third child, who will be named Olive. Susie is an engineer, who used to play rugby in college and also believes in education. Her children, Copper and Mercury, are ages 3 and 5 today, respectively. George believes that with $100,000, a student should be able to obtain a great education, even if it is not the exact amount necessary to fund all of a student's time in college. George would to provide each of his grandchildren with the ability to have $100,000 of purchasing power when they turn 18. Education costs are approximately $30,000 per year at private schools and about $15,000 at public schools. Education costs have been increasing at a consistent rate of 7% per year and are expected to continue, while inflation has been at a steady 3% per year. How much should he set aside today to fund his goal for his grandchildren if he can earn a rate of return of 9%?

377520

Kim and Nick are planning to save for their daughter Chloe's college education. Chloe was born today and will attend college for 4 years, starting at age 18. Tuition currently costs $15,000 per year and tuition inflation is expected to be 6%. They believe they can earn 9% on their investments. How much must Kim and Nick save at the end of each year, if they want to make their last savings payment at the beginning of Chloe's first year of college?

3978.53

Roshan is a freshman at Florida State University where his tuition is $4,000. Shante, his older sister, is a graduate student at Expensive University, where tuition is $25,000. What is the maximum tax credit Roshan and Shante's parents can take?

4500 2000(100%)+10000(20%)=4500

What is her gross income for income tax purposes if her adjusted tax basis in the stock was $2,000?

47000

Tan and Chia are contemplating making a contribution to their grandchildren's education fund. They are both retired, have a significant amount of discretionary income and are concerned about estate transfer taxes. Which of the following education planning techniques would you recommend?

529 savings plan

In May of this year, Gonzo inherited a vacation home from his friend Kermit who passed away unexpectedly. Kermit had paid $200,000 to purchase the property, and it was valued in his estate at $325,000. In December of this year, Gonzo sold the property for $410,000. Which of the following best describes the tax treatment for Gonzo regarding the sale of the vacation home?

85000 LTCG holding period always long term

What is the net effect on Jason's taxes if he is in the 32% tax bracket?

960 Total Loss 4000........3000(0.32)=960

Which of the following is not an itemized deduction from adjusted gross income?

Alimony

Which of the following is a fiscal policy tool used by Congress that influences the money supply and interest rates?

Debt management

Which of the following items would cause the demand curve to shift to the right?

Decrease tax rate

Which is not one of the primary responsibilities of Federal Reserve

Ensure positive returns in equity markets

Mitch and Jennifer have AGI of $125,000 and have not planned for their children's education. Their children are ages 17 and 18 and the parents anticipate paying $20,000 per year, per child for education expenses. Which of the following is the most appropriate recommendation to pay for the children's education?

PLUS loan

Which of the following types of aid are not need based?

Parent Plus Loan

All of the following are examples of monetary policy except?

Prime lending rate

Assets exempt in bankruptcy

Roth IRA Rollover Roth IRA

Trina gave her nephew Roy 100 shares of HLM Corporation stock that she purchased 6 months ago for $10,000. At the time of the gift, the fair market value of the stock was $12,000. Which of the following statements concerning the stock is correct?

Roy basis on stock 10000

If grandparents contributed $150,000 to a 529 Savings Plan for their grandchild, elected to split the gift and treat it ratably over a 5-year period, and one of the grandparents died during the next year, which of the following statements is correct?

The gross estate of the deceased grandparent would have to include $45,000 of the contributions to the 529 plan. (0.60)(75000)

Gretchen, who is age 30 and not a dependent of her parents, has incurred several expenses this year related to her pursuit of a bachelor degree. Which of the following may she deduct above-the-line on her tax return?

The interest paid in the current year on her student loans that were taken out in previous years.

Which of the following assets will be countable in the financial aid formula for a college student?

The investments in a 529 Savings Plan owned by the student's parents.

Which statement regarding financial aid is not correct?

Unsubsidized Stafford loans are need-based loans, and the government pays the interest until 6 months after a student leaves school.

CJ is 40 and wants to retire in 25 years. He expects to live until age 95. He currently has a salary of $100,000 and believes that he needs to accumulate a total of $1 million (future dollars) for retirement by age 65 and he will be fine. He currently has $150,000 saved for his retirement that is earning 9%. He is able to save $20,000 towards his retirement. However, he is willing to use some or all of this amount to fund education for his grandchild, Bob, if and when his retirement objective appears to be met in terms of funding. Edward, Bob's dad and CJ's son, wants Bob to go to school for six years and expect that it will cost $50,000 per year in today's dollars. Inflation has been modest at 3%, while the cost of education has been increasing at 6% per year. Edward would like to know how much he should save every year to fund Bob's college expenses, assuming that he can max out his dad's (CJ) contribution, which would begin in one year and stop when Bob goes to school. Edward would also begin contributing in one year and stop when Bob goes to school and wants to assume he can earn 9% per year. How much does Edward need to save each year? (round answer to nearest $1,000)

dad has it covered