Term
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Definition
| Accounting, Laws, Economics and Finance, and Ethics |
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Term
| During the 1970's how high did the US Marginal Tax rate get? |
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Definition
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Term
| 3 components of SW Framework |
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Definition
| A set of algebraic equations, subjective and other factors not included in the equations, and descriptions of rules and concepts |
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Term
| 3 major components of the Federal Budget Expenditures |
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Definition
Social Security/Unemployment (33%)
Medicine/Healthcare (27%)
Military (16%) |
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Term
| How big of a deficit did the Federal Gov't budget for 2015? |
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Definition
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Term
| Definition of efficient tax planning |
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Definition
| The process of identifying tax strategies that maximize after-tax profitability in a legal and ethical manner |
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Term
| 3 ways to measure after-tax profitability |
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Definition
FV of After-tax cash flows
Present value of After-tax cash flows
Internal Rate of Return of After-tax cash flows |
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Term
| 3 parties involved in taxes |
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Definition
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Term
| Items excluded from Taxable income |
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Definition
| Interest from municipal bonds, federal taxes |
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Term
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Definition
| All parties, All tax costs, and All nontax costs and benefits |
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Term
| "Implicit taxes in dollars" |
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Definition
| Taxes paid indirectly in the form of lower BTCF on tax-favored investments |
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Term
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Definition
| Change in BTCF x (1 - t) when the change in TI = the change in BTCF |
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Term
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Definition
| Investor who is indifferent between alternative investments |
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Term
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Definition
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Term
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Definition
| The accounting gain or loss (difference between sale price and adjusted basis) - not always affecting tax liability |
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Term
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Definition
| The amount of gain or loss that appears on the tax return - increase or decrease tax liability |
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Term
| How are federal income taxes treated on the tax return? |
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Definition
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Term
| Why does depreciation fluctuate between income statements and tax returns? |
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Definition
| Straight-line depreciation is used for book purposes where accelerated depreciation is used for tax purposes |
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Term
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Definition
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Term
| 4 steps to SW problem solving framework |
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Definition
Identify all alternatives
Evaluate each
Select optimal alternative based on evaluation
Monitor and modify the plan if necessary |
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Term
| How the do the rankings of calculating FV vs. r compare? |
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Definition
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Term
| When is the tax character determined? |
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Definition
| Immediately after the transaction and before any netting takes place |
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Term
| 6 types of tax characters |
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Definition
Ordinary income/loss
Short-term capital gain/loss
Long-term capital gain/loss
Taxable interest income
Dividend income
Itemized deductions |
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Term
| What rate is ordinary income taxed at? |
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Definition
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Term
| What rate are STCG/L taxed at? |
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Definition
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Term
| What rate are LTCG/L taxed at? |
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Definition
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Term
| What rate is dividend income taxed at? |
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Definition
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Term
| Two types of capital assets |
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Definition
Investment assets
Personal Assets |
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Term
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Definition
| Asset expected to rise in value held by an individual or a business - depends on the motive of who is holding |
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Term
| What assets are not included in the investment asset category? |
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Definition
| Inventory and assets utilized in an active trade or business |
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Term
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Definition
| Not used for business or investments |
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Term
| When an investment assets realizes a gain or loss, what should you do? |
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Definition
| Recognize it and tax at g (shield if loss) |
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Term
| When a personal asset realizes a gain what should you do? What about for a loss? |
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Definition
Recognize the gain and tax at g
Do not recognize the loss |
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Term
| When inventory realizes a gain or loss, what should you so? |
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Definition
| Recognize it and tax at t (shield if loss) |
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Term
| How should corporations deal with multipole capital gains and losses? |
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Definition
Net them all together
Net capital gain is taxed as ordinary income (t) |
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Term
| How far back are Net capital losses carried back and forward? |
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Definition
Carry back 3 years
Carry forward 5 years |
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Term
| How are net capital gains treated? |
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Definition
| Taxed as ordinary income in the current year |
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Term
| What should be done with a Negative Taxable income? |
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Definition
| Treat as a Net Operating Loss and carry back 2 years and/or carry forward 20 years |
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Term
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Definition
| A subtotal of all income earned during a year |
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Term
| What is the relationship between g and t |
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Definition
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Term
| How high do ordinary deductions on all capital loss go up to? |
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Definition
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Term
| How do individuals carry over capital losses? |
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Definition
| Carry forward for as long as needed |
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Term
| What tax rate is applied to LTCL and STCL for the tax shield? |
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Definition
| Either g or t depending on the netting process |
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Term
| Relative advantage of Raw Land |
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Definition
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Term
| Relative advantage of SPDA |
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Definition
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Term
| Relative advantage of Mutual fund |
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Definition
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Term
| With respect to g, how do Mutual funds and SPDAs compare? |
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Definition
If g>0
At shorter n, mutual fund r > SPDA r
At longer n, SPDA r > Mutual fund r |
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Term
| What are the implications if g=0? |
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Definition
Mutual fund r > SPDA r
Raw land r = R |
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Term
| With what type of dollars are deductible pension fund deposits made? |
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Definition
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Term
| With a constant t, what happens to the r of deductible pension funds? |
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Definition
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Term
| With a declining marginal tax rate, what happends to the r of deductible pension funds? |
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Definition
r>R
r falls as the period increases, but remains greater than R |
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Term
| With a rising marginal tax rate, what happends to the r of deductible pension funds? |
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Definition
r<R
As n increases, r increases but remains smaller than R |
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Term
| Ranking of savings vehicle r's |
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Definition
Lowest - Savings Account
MF and SPDA depend on n
Next highest - Raw Land
Highest - Roth IRA |
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Term
| Characteristics of savings accounts |
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Definition
| Initial investment is not deductible, annual taxation, tax rate is ordinary (t not g) |
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Term
| Characteristics of mutual funds |
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Definition
| Initial investment is not deductible, annual taxation, tax rate is capital gains (g) |
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Term
| Characteristics of raw land |
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Definition
| Initial investment is not deductible, Deferred taxation, tax rate is capital gains (g) |
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Term
| Characteristics of Single Preferred Deferred Annuity |
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Definition
| Initial investment is not deductible, Deferred taxation, tax rate is ordinary (t) |
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Term
| Characteristics of Deductible Pension (401k) |
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Definition
| Initial investment IS deductible, Deferred taxation, tax rate is ordinary (t) |
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Term
| How do capital gains and losses affect taxable income? |
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Definition
| They do not, they are taxed separately |
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