Stanford University Tax Planning for Individuals Cost Benefit Analysis

The assignment below will assess your knowledge and understanding of  individual tax planning strategies, and your ability to apply that  knowledge to solve problems.

Answer the following homework problems thoroughly and in complete  sentences. Save your answers in a Microsoft® Word® document and submit  them to the Dropbox.

1. Ronda Mitzger is in the 35 percent  federal tax bracket and the 5 percent state income tax bracket. Ronda’s  state defines gross income the same way as the federal definition. Ronda  can choose to have her employer pay $5,000 each year towards her  child-care expenses or to receive a $7,500 increase in her salary. Which  benefit should she choose? Explain your answer and cite your tax  research appropriately.
2. Explain why the Bolton method of  allocating taxes and interest of a vacation home may provide significant  tax savings for a taxpayer caught by the Code Sec. 280A limitations.  Does the IRS approve of this allocation method?
3. Near the end of  the current tax year, Joel Chason has $120,000 AGI before accounting for  a $15,000 loss from a residential real estate investment property that  he is an active participant in. Joel received a large, non-taxable  inheritance last month and has the opportunity to invest the amount in  either a taxable bond fund that will pay $10,000 in interest in the  current year or a nontaxable bond fund that will pay him $6,500 in  interest in the current year. If Joel expects roughly the same results  in the next several years, what advice would you give regarding which  investment to make? Explain your answer and cite your tax research  appropriately.
4. Maria enrolled in her employer provided high  deductible (medical insurance) health plan (HDHP) that has a $2,750  deductible that covers medical expenses (other than dental and vision).  Maria’s employer contributes $200 per month to her FSA, which covers  dental and vision care. Maria incurred the following medical costs  during the year: $600 to her dentist, $400 for contact lenses, and  $1,500 for copays and lab costs related to her doctor visits. How can  Maria be reimbursed for these expenses? What advice would you give  related to rolling over any amounts in the two different medical  reimbursement plans? Explain your answer and cite your tax research  appropriately.
5. On April1, 2016, Itty Bitty Inc. grants Tao a  nonqualified stock option to acquire 1,000 shares of the company’s stock  for $12 per share. The FMV of the stock on the date of grant is $15.  The option does not have a readily ascertainable FMV. On June 1, 2016,  when the FMV of the stock is $18, Tao exercised the stock option. What  are the tax consequences on the following?
   1. for Tao on the grant date
   2. for Itty Bitty Inc on the grant date
   3. for Tao on the exercise date
   4. for Itty Bitty Inc on the exercise date
6. Monte’s  employer maintains a profit-sharing plan for all its employees. What is  the maximum deductible contribution in 2020 for each of the following  situations?
   1. salary is $86,000
   2. salary is $295,000