Question

WHAT DO YOU RECOMMEND? Ace Steven and Florence Szpanka have known each other for a few years and plan to get married the year after next. Ace earns $74,000 annually as a manager in a copper mining plant. He also earns about $20,000 per vear selling jewelry that he designs at craft shows held just about every month in various nearby cities. Soon after they marry, Ace plans to take a year off to go back to college full time to finish the last year of his undergraduate degree. Florence earns $68,000 annually working as an institutional sales representative for an insurance company. Both Ace and Florence each contribute $100 per month to their employer-sponsored 401(k) retirement accounts. Ace has little additional savings, but Florence has accumulated $18,000 that she wants to use for a down payment on a home. Florence also owns 300 shares of stock in an oil company that she inherited six years ago when the price was $90 per share; now the stock is worth $130 per share. Ace and Florence live in a state where the state income tax is 6 percent What wou at Would you recommend to Ace and Florence on the subject of managing

Answer 1

Ans.1. Ace can use his money to pay for college expenses as this amount is tax deductible.

Ans.2. Sales Value of Stock- 300 x $130 = $39,000

Capital Gain on sale of Stock- ($130 - $90) x 300 = $12,000

Tax on such Gain- $12,000 x 25% = $3,000

Therefore, money realized by Florence- $39,000 - $3,000 = $36,000

Ans.3. Buy the home as they would get the amount as tax deductible against the capital gain made on stocks.

Ans.4. Increased contribution to their employer-sponsored plan would result in future tax free returns.

Ans.5. This would result in a full fledged business undertaking on Ace's part.