Tax Simulation Research Paper - 1522 Words

Subject: Tax Issues of Lee’s Decision on Purchasing a Vacation Condo Facts: Mr. and Mrs. Lee are considering investing in a $500,000 condominium in Miami Beach, Florida, as their vacation home. Their marginal tax bracket is 33% and they also pay Maryland state and country income taxes at a rate of 7%. They are required to put down a 20% deposit and will get a mortgage for the balance for ten years’ interest at 5% annually. They can rent the condominium back to the Developer for two years for $4,000 a month and still use the unit for up to 30 days a year. Besides, indirect expenses are estimated including property taxes at $10,000 a year, a maintenance fee at $6,000 a year, insurance at $200 a month and utilities at $300 a month. The†¦show more content†¦In  §1.183-1(d), the renting and holding of the condo will be considered a single activity only if the income derived from renting exceeds the deductions which are not directly attributable to the holding of the condo. In fact, assuming the rental period will be 11 months of two year s, the annual rental income will not exceed the annual deduction. In regard of the Lees’ intention to spend more time in Miami after their retirement, it is not an activity engaged in for profit. Issue C: What are the prospective deductions and tax savings assuming ownership and operation of the condo if the ownership and operation of the condo is not an activity entered into for profit? Authorities:  §1.183-1(d),  § 280A(e),  § 163(d),  §1.164,  § 168(b) Conclusion: With standard deduction, the taxable income of first two years will respectively be $8,140 and $7,417. Consequently, the tax savings will be $5,454 and $4,969. If it is with itemized deduction, the taxable income will be $9,073 and $8,295 and the corresponding tax savings will be $6,079 and $5,558. Analysis: The prospective deductions include interest expense, real property tax, utilities, insurance, maintenance and depreciation, which may generate tax savings limited to the income fromShow MoreRelatedDiageo Case Study1411 Words   |  6 Pagespolicies will be discussed. A simulation model was created by Diageo’s director of Finance and Capital Markets, Ian Simpson, and Adrian Williams, the firm’s Treasury Research Manager, to understand the tax benefits of higher gearing and the cost of financial distress. In this report, I will discuss the historical financial policies in Diageo. The actions of selling Pillsbury and spinoff of Burger King will be valued. And the tradeoff theory and Simpson and Williams’ simulation model will be studied andRead MorePrada Ipo or Not Essay1490 Words   |  6 Pagessix to twelve months and to finance its intended growth into the Asian (especially Chinese) markets Alternative Solutions: #1) IPO: (Initial Public Offering) Cons: High tax and pricing We received little demand from our (retail) clients for the (Prada) shares. It might be the 12.5 percent tax that scared them away and the pricing itself was expensive when it compared with its peers, said Alfred Chan, chief dealer at Cheer Pearl Investment. Unlike institutions, our retail clientsRead MoreApplication of Raroc Model in Bank System Literature1165 Words   |  5 Pagesgoal of the banking business, matching the price and dynamic risk of the loans, reflecting different treatment between the difference of risk degree of loans. This is conducive to the optimization and the rationalization to risk of bank loans. This paper focused on the improvements of RAROC Pricing and its application at our country s commercial bank. In the western commercial bank loan pricing, RAROC in recent years has been widely adopted, it is a base Pricing methods in the economic capitalRead MoreRisk Analysis on Investment Decisions1436 Words   |  6 Pagesadequate analysis, and justified conclusions (Cooper and Schindler, 2003). In this paper, the methods of net present value and internal rate of return are examined based on real-world capital budgeting decisions. This paper also gives insight on valuation techniques used to determine internal and external investment decision strategies and the risk associated with the investment decisions. In the Capital Budgeting Simulation, Silicon Arts Incorporated (SAI) is a four-year old company that produces digitalRead MoreInternational Trade Concepts1095 Words   |  5 PagesInternational Trade Concepts Shelly Hall ECO/372 March 12, 2010 Robert Chase The Simulation on International trade concepts is a study of the country of Rodamia and the decisions the leaders made regarding imports and exports for the country. While Rodamia is a fictitious country, the concepts of international trade, tariffs, quotas, and imports and exports are all applicable to the effects on the U.S. economy. This paper will discuss in detail the meaning and effect each of these concepts have onRead MoreThe Case For A Progressive Tax1713 Words   |  7 Pagesprogressive tax: from basic research to policy recommendations Authors: Peter Diamond and Emmanuel Saez (2011) The central of issue in policy making is the fair distribution of the tax burden; the tax should minimize the social welfare of the individual’s subjects to his or her own budget constraints. A large academic literature has developed models of optimal tax theory to cast light on the problem of optimal tax progressivity. This article has tried to explore the path from basic research results ofRead MoreMonopoly and Quasar1166 Words   |  5 Pagesneutron uses high speed optical conductors, which is the first technology of its kind to be used in a laptop. Over time many businesses need to evolve to stay competitive and continue to make a profit in the market place that they have entered. This paper will discuss how the Quasar computer company moved through the different market structures over the past ten years and how the pricing and non-pricing strategies affected the company’s growth. During their transition the company faced many obstaclesRead MoreImpact Of Tax On Wag e And Employment Essay2275 Words   |  10 PagesLiterature Review: The idea of tax progressivity has a significant employment effect and has been investigated over the past few years and so. According to theoretical research on the effect of tax progression on equilibrium wage and employment critically depend on the nature of the agent whether they are wage-setters or wage-takers. One strand of theoretical work, associated in particular with Richard Jackman and Richard Layard, has examined the implications of so called tax-based incomes policies. TheseRead MoreRole of the computer system in different environment1597 Words   |  7 Pagescomputer, as we have gotten so used to this machine. The importance of computers cannot be denied in the corporate or business world, at the work place and even in ones personal life. In the modern work place, pen and paper are becoming fade away. It will not be long, before pen and paper stop to exist altogether. Same is the case in schools and colleges. Computer has become an important tool for keeping databases, filing systems, track records. It has made record keeping and account keeping much easierRead MoreRisk Mitigation Using Joint Venture Agreement in the Upstream Petroleum Industry15328 Words   |  62 PagesCONTENT Declaration Acknowledgements Abstract Content List of figures List of tables Abbreviations Chapter 1: Introduction 1.1 Background 1.2 Motivation amp; Conceptual Framework 1.3 Research Questions 1.4 Significance Of Study 1.5 Scope And Limitation 1.6 Outline Of Dissertation Chapter 2: Literature Review 2.1 Background 2.2 Joint Venture – An Introduction 2.3 Types of Joint Venture 2.4 Choice of Joint Venture