1. Drew and Joanne are going to buy a new car for $35,000. They just obtained a home equity line of credit on their home and currently have no balance outstanding. The car dealer offered them a 5 year loan at a special rate of 3%. The borrowing rate on their home equity line of credit is also 3%. From purely a tax viewpoint should they access their line of credit or borrow from the auto dealer to purchase the car. What non-tax considerations should they take into account?
2. Iris is planning to make a charitable contribution to her church of $50,000. She can either give $50,000 of cash, or stock worth $50,000 and a basis of $10,000 and which she has held for 5 years. The donation of which property gives the better tax result? If Iris’ AGI was $70,000 what other considerations would she have to take into account?
3. Gloria has AGI of $3,000,000. She invests in a hedge fund that charges a 2% management fee. The hedge fund earns 10% before the fee and 8% after the fee. The fee is $40,000 and Gloria’s only other “other itemized deduction” are tax preparation fees of $10,000. What tax concerns should she have with respect to her hedge fund investment?
4. What is the rationale for trying bunch your itemized deductions in one yearand then try to minimize them in the following year?