Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 5, Problem 43P
To determine
Assist B, providing information she needs in taking proper decision in the given situation.
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Bertha is considering taking an early retirement offered by her employer. She would receive $3,000 per
month, indexed for inflation. However, she would no longer be able to use the company's health
facilities, and she would be required to pay her hospitalization insurance premiums of $8,000 each
year. Bertha and her husband will file a joint return and take the standard deduction. She currently
receives a salary of $55,000 a year. If she retires, she will spend approximately $300 less each month
for commuting and clothing.
Bertha and her husband have other sources of income and are in (and will remain in) the 22%
marginal tax bracket. Her income tax for the current year was $8,875. She currently pays Social
Security and Medicare taxes of 7.65% on her salary, but her retirement pay would not be subject to
this tax. According to Bertha, she and her husband could live well if her after-tax retirement income
was at least 50% of her current income.
Determine what her disposable income is…
Lynn estimates that when she retires at age 60, she will have$165,766.18 in her retirement account. This account earns 6%annual interest compounded yearly. Her insurance companypredicts that she will live until age 85. She doesn’t want to outliveher income, so she allows another 3 years of life beyond theinsurance company’s estimate. How much money will Lynn beable to withdraw from her account each year?
Julie has just retired. Her company's retirement program has two options as to how retirement benefits can
be received. Under the first option, Julie would receive a lump sum of $158,000 immediately as her full
retirement benefit. Under the second option, she would receive $21,000 each year for five years plus a lump-
sum payment of $66,000 at the end of the five-year period.
Use Excel or a financial calculator to solve. Round answers to the nearest dollar.
Required:
1a. Calculate the present value for the following assuming that the money can be invested at 12%.
Present Value of
First Option
Lump-sum payment
2$
158,000
Present Value of
Second Option
Total present value
$
134,629
1b. If you can invest money at a 12% return, which option would you prefer?
First option
Second option
References
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Chapter 5 Solutions
Individual Income Taxes
Ch. 5 - Prob. 1DQCh. 5 - Prob. 2DQCh. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Holly was injured while working in a factory and...Ch. 5 - Prob. 9DQCh. 5 - Prob. 10DQ
Ch. 5 - Ted works for Azure Motors, an automobile...Ch. 5 - Prob. 12DQCh. 5 - Eagle Life Insurance Company pays its employees...Ch. 5 - Several of Egret Companys employees have asked the...Ch. 5 - Prob. 15DQCh. 5 - Tammy, a resident of Virginia, is considering...Ch. 5 - Andrea entered into a 529 qualified tuition...Ch. 5 - Prob. 18DQCh. 5 - Prob. 19DQCh. 5 - Valentino is a patient in a nursing home for 45...Ch. 5 - Prob. 21CECh. 5 - Ellie purchases an insurance policy on her life...Ch. 5 - Prob. 23CECh. 5 - Leland pays premiums of 5,000 for an insurance...Ch. 5 - Jarrod receives a scholarship of 18,500 from...Ch. 5 - Prob. 26CECh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - LO.2 What is the taxpayers gross income in each of...Ch. 5 - LO.2 Donald was killed in an accident while he was...Ch. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - LO.2 Leigh sued an overzealous bill collector and...Ch. 5 - LO.2 Determine the effect on gross income in each...Ch. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - LO.2 Belinda spent the last 60 days of 2019 in a...Ch. 5 - LO.2 Tim is the vice president of western...Ch. 5 - LO.2 Does the taxpayer recognize gross income in...Ch. 5 - Prob. 43PCh. 5 - Prob. 44PCh. 5 - Prob. 45PCh. 5 - LO.2, 5 Rosas employer has instituted a flexible...Ch. 5 - Prob. 47PCh. 5 - Prob. 48PCh. 5 - Prob. 49PCh. 5 - Prob. 50PCh. 5 - LO.2 Tonya, who lives in California, inherited a...Ch. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Prob. 56PCh. 5 - LO.4 Vic, who was experiencing financial...Ch. 5 - Prob. 1RPCh. 5 - Prob. 2RPCh. 5 - Prob. 3RPCh. 5 - Prob. 4RPCh. 5 - Prob. 1CPACh. 5 - Jeffrey Dean, a Masters Degree candidate at North...Ch. 5 - Linda is an employee of JRH Corporation. Which of...Ch. 5 - Kim was seriously injured at her job. As a result...Ch. 5 - Danny received the following interest and dividend...Ch. 5 - Prob. 6CPA
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