Doug​ Klock, 56​, just retired after 31 years of teaching. He is a husband and father of three​ children, two of whom are still dependent. He received a ​$154 comma 000 ​lump-sum retirement bonus and will receive ​$2 comma 500 per month from his retirement annuity. He has saved  $ 145 comma 000 in a​ 403(b) retirement plan and another ​$97 comma 000 in other accounts. His​ 403(b) plan is invested in mutual​ funds, but most of his other investments are in bank accounts earning 2 or 3 percent annually. Doug has asked your advice in deciding where to invest his​ lump-sum bonus and other accounts now that he has retired. He also wants to know how much he can withdraw per​ month, considering he has two children in college and a nonworking spouse. His current monthly expenses total $ 5 comma 800. He does not intend to begin receiving Social Security until age 67​, and his monthly benefit will amount to ​$1 comma 600. He has grown accustomed to some risk but wants most of his money in​ FDIC-insured accounts.
a. Assuming Doug has another account set aside for​ emergencies, how much can he withdraw on a monthly basis to supplement his retirement annuity if his investments return 4 percent annually and he expects to live 40 more​ years?
b. Ignoring his Social Security​ benefit, is the amount determined in part ​(a​) sufficient to meet his current monthly​ expenses? If​ not, how long will his supplemental retirement income last if his current monthly expenses remain at ​$5 comma 800 per​ month? How long will it last if his expenses are reduced to ​$4 comma 600 per​ month?
c. If he withdraws ​$3 comma 300 per​ month, how much will he have in 11 years when he turns 67​? If he begins to receive Social Security payments of ​$1 comma 600 at 67​, how many years can he continue to withdraw ​$1 comma 700 per month from his​ investments?
d. If the inflation rate averages 2 percent during​ Doug's retirement, how old will he be when prices have doubled from current​ levels? How much will a soda cost when Doug​ dies, if he lives the full 40 years and soda currently costs ​$1 ​today?

Daniel B Butler and Freida C. Butler, husband and wife, file a joint return. The butlers live at 625 Oak Street in Corbin, KY 40701. Dan’s Social Security number is 111‐11‐1112, and Freida’s is 123‐45‐6789. Dan was born on January 15, 1965, and Freida was born on August 20, 1966.

During 2016, Dan and Freida furnished over half of the total support of each of the following individuals, all of whom still live at home.

a) Gina, their daughter, age 22, a full‐time student, has no income of her own. Gina’s Social Security number is 123‐45‐6788.

b) Sam, their son, age 20, who had gross income of $6,300 in 2016. He graduated from high school in May 2016, Started College in August 2016, then dropped out of college in September 2016. Sam’s Social Security number is 123‐45‐6787.

c) Ben, their oldest son, age 26, is a full‐time graduate student with gross income of $5,200. Ben’s Social Security number is 123‐45‐6786.

Dan was employed as a manager by WJJJ, Inc. (employer identification number 11‐ 1111111, 604 Franklin street, Corbin, KY 40702), and Freida was employed as a salesperson for Corbin Realty, Inc. (employer identification number 98‐7654321, 899 Central Street, Corbin, KY 40701). Selected information from the W‐2 Forms provided by the employers is presented below. Dan and Freida use the cash method.

Line Description Dan   Freida

1 Wages, tips, other compensation   $74,000 $86,000

2 Federal income tax withheld 1,000 12,400

17 State income tax withheld 12,960 3,440

Freida sold a house on December 30, 2016, and will be paid a commission of $3,100 (not included in the $86,000 reported on the W‐2) on the January 10, 2017 closing date.

Before marrying Freida, Dan was married and divorced to Sarah. Under the divorce agreement, Dan is to pay Sarah $500 per month. Dan paid Sarah $5,500 in 2016, his December alimony payment was not made until January of 2017. Sarah’s Social Security number is 123‐45‐6785

The Butlers also had (1) $1,600 in interest income from their savings account, (2) they sold ABC stock on 8/15/2016 for $10,000 (originally purchased for $4,000 on 1/15/2013), and (3) they sold XYZ stock on 10/15/2016 for $3,000 (originally purchased for $4,000 on 12/15/2015).

Prepare the 2016 Federal income tax return for the Butlers’. You may work in groups no larger than 3 (i.e. 1, 2, or 3). Submit one tax return per group. Please submit (1) a cover page with a list of students who participated in the group project, (2) Form 1040, (3) calculation of Capital gain (including LT or ST), and (4) calculation of tax.

Hints:

1) Take the standard deduction

2) Don’t forget to check the box for the filing status

3) Review the rules as for what qualifies as a “student” for purposes of the Qualifying Child tests. See IRS publication 501 page 13.

4) Make sure you are not using 2017 information (i.e. personal exemptions, standard deduction, tax brackets etc.).

5) Normally interest and capital gains would require additional forms (Schedule B and Schedule D). However for this assignment do not prepare those forms/schedules, simply enter the appropriate amount directly onto form 1040.

A.J. is a 63-year-old white woman who is brought to the emergency department by her husband. She has become progressively weaker and was admitted for further evaluation.

Subjective data: complains of progressive weakness over the last couple of weeks, has had a recent sinus infection that resolved after two courses of antibiotics, complains of shortness of breath, has noticed a lot of bruising lately

Objective data: Physical exam: Has scattered petechiae on both ankles and two ecchymoses on her arms and one on her left lower leg, her skin is very pale, B/P 100/70 (lying), temperature 96.8 F, respiratory rate 26/min.

Labs: Hct 18.2%, Hgb 5.9 g/dL, WBC 2600/uL, Platelet count 72,000/uL, peripheral blood smear indicates that 80% of the WBCs are blasts, PT 18 sec., aPTT 37 sec, LDH 560 units/L

Bone Marrow biopsy: Multiple myeloblasts (>50%)

Interprofessional care: Consultation with a hematologist-oncologist, two units of packed red blood cells, diagnosis –acute myelogenous leukemia

What components of the laboratory test results and bone marrow biopsy suggest acute leukemia?

How is acute myelogenous leukemia treated?

What is A.J.’s prognosis?

What are the life-threatening problems that can occur as a result of this disease and treatment? How can you anticipate and assess for these problems?

Bill and Alice Savage, husband and wife and both age 42, have the following transactions during 2016:

a. They sold their old residence on January 28, 2016, for $380,000. The basis of their old residence, purchased in 2006, was $70,000. The selling expenses were $20,000. On May 17, 2016, they purchased and moved into another residence costing $150,000.

b. On April 28, 2016, they sold for $8,000 stock that Alice had received as a gift from her mother, who had purchased the stock for $10,000 in 2011. Her mother gave Alice the stock on November 15, 2015, when the fair market value was $9,400.

c. On May 24, 2016, Bill sold for $21,000 stock inherited from his father. His father died on June 14, 2015, when the fair market value of the stock was $9,000. Bill's father paid $7,000 for the stock in 2009.

d. On August 11, 2016, they sold a personal automobile for $8,000; basis of the automobile was $20,000 and it was purchased in 2013.

e. They had a carryover and other stock transactions as follows:

Bill had a salary of $40,000 and Alice had a salary of $28,000. They have no children. They paid state income taxes of $3,200, sales tax of $400, federal income taxes of $15,000, and property taxes of $1,800. In addition, they contributed $5,600 to their church and paid $4,000 interest on their home mortgage.

Compute bill and Alice's taxable income for 2016.

1. Mary’s husband Ben died during the current year. She was the beneficiary of his life insurance policy in the face amount of $300,000. Because Mary likes to go on expensive vacations, she is concerned that she will spend all the money in a few months. She decides to leave the money with the insurance company and will take the money out over a period of ten years. In the current year, Mary receives a check for $34,000 from the insurance company. What are the tax consequences, if any, of this payment to Mary?

2. A single taxpayer pays $1,200 of state income taxes in 2018. He files his 2018 tax return and claims the standard deduction of $12,000. In 2019, he receives a state income tax refund of $700. How much, if any, of the $700 refund must he include in gross income on his 2019 return?

​(​EBIT-EPS analysis​) Bill and Kate Theil are not only husband and wife but entrepreneurs who have established three successful businesses. The proposed plan for their latest effort involves a series of international retail outlets to distribute and service a full line of ingenious home garden tools. The stores would be located in​ high-traffic cities in Latin America such as Panama​ City, Bogotá,​ São Paulo, and Buenos Aires. The entrepreneurs have proposed two financing plans. Plan A is an all​ common-equity structure. Five million dollars would be raised by selling 200,000 shares of common stock. Plan B would involve the use of​ long-term debt financing. Three million dollars would be raised by marketing bonds with an effective interest rate of 15 percent. Under plan​ B, another​ $2 million would be raised by selling 80,000shares of common stock. With both​ plans, $5 million is needed to launch the new​ firm's operations. The debt funds raised under plan B are considered to have no fixed maturity​ date, because this portion of financial leverage is thought to be a permanent part of the​ company's capital structure. The two promising entrepreneurs have decided to use a 22 percent tax rate in their​ analysis, and they have hired you on a consulting basis to do the​ following:

a. Find the EBIT indifference level associated with the two financing proposals.

b. Prepare income statements for the two plans that prove EPS will be the same regardless of the plan chosen at the EBIT level found in part a.

Helen Adams, 81 years of age, relates to you that her husband, Jim, 83 years of age, has Alzheimer’s, but she is caring for him at home. He is still quite manageable for the present, but she has no idea for how much longer. They own their own home subject to a line of credit secured by a mortgage. It is worth $300,000 and the balance on the line of credit mortgage is $20,000. Jim has an IRA worth $160,000 from which he is drawing $2,000 per month, the minimum required distribution. They have joint ownership of a bank account with $24,000 in it, and one automobile worth $9,000. Helen has $700 per month and Jim has $1,200 per month in Social Security income. Helen and Jim have a son, Don, 57 years old, who is married with three children and who lives twenty minutes away by car. They also have a daughter, Marie, 53 years old, who is married with two children and who lives half way across the country. Helen says she has a power of attorney document from Jim, who cannot understand financial matters. She asks what can be done to protect their assets from nursing home costs. What preliminary issues (prior to actual planning) do you need to discuss with Helen? What might be able to be done to protect assets against a spend-down upon Jim’s admission into a nursing home? Explain your answers.

(Analysis of Alternatives) Julia Baker died, leaving to her husband
Brent an insurance policy contract that provides that the beneficiary (Brent) can
choose any one of the following four options
a. €55,000 immediate cash.
b. €4,000 every 3 months payable at the end of each quarter for 5 years.
c. €18,000 immediate cash and $1,800 every 3 months for 10 years, payable at
the beginning of each 3-month period.
d. €4,000 every 3 months for 3 years and $1,500 each quarter for the following 25
quarters, all payments payable at the end of each quarter.

Instructions
If money is worth 2½% per quarter, compounded quarterly, which option would you
recommend that Brent exercise?

1. Jade turned 65 yesterday and purchased a joint and survivorship annuity (with her husband) immediate life annuity with the following two features:
   1. 10-year period certain
   2. Variable life/inflation guard

You're the couple’s financial/insurance advisor, explain feature (a) (10-year period certain) and feature (b) (variable life/inflation guard) to the couple so they can understand these features they're getting

Cato Corporation incorporated six years ago in California, with Tim and Elesa, husband and wife, owning all the Cato stock. Immediately thereafter, Cato made an S election effective for that year. Tim and Elesa filed the necessary consents to the election. On March 10 of last year, Tim and Elesa transferred 15% of the Cato stock to the Reid and Susan Trust, an irrevocable trust created three years earlier for the benefit of their two minor children. Early in the current year, Tim and Elesa’s tax accountant learns about the transfer and advises the couple that the transfer of the stock to the trust may have terminated Cato’s S election. Research sources suggested by the tax manager include Secs. 1361(c)(2), 1362(d)(2), and 1362(f). Question: Is the accountant right? Will the transfer made by both Tim and Elesa terminate the S election of the corporation? please support your answer with Secs. 1361(c)(2), 1362(d)(2), and 1362(f)