Task 1: Accounting Internal Memo And Client Letter (300 Word

Question

Task 1 Accounting Internal Memo 300 Words And Client Letter 300 Wo This research assignment will include a memo and a client letter. The facts for this assignment are as follows: Mary and Bob have been married for 25 years. They are both college professors. Mary (50 years old) makes $65,000 annually and Bob (60 years old) makes $75,000 annually. Their oldest daughter is getting married. Bob and Mary are considering financing the wedding through one of three options: 1) taking out a second mortgage on their home at a 7% interest rate, 2) withdrawing funds from their IRAs, or 3) selling their rental property. The wedding costs $35,000. Their home equity is $150,000; they have $80,000 in IRAs; the rental property basis is $20,000, and it can be sold for $120,000. They want to determine the best way to finance the wedding considering tax implications. The research will analyze the facts, identify issues such as tax consequences of each option, locate relevant authorities like the Internal Revenue Code and relevant court rulings, and assess how these authorities impact their choices. The memo will conclude with a recommendation based on the tax effects. The client letter will summarize the research question, outline the facts and analysis, and provide clear recommendations for financing.

Dr. Jack HW Helper · Accepted Answer

Introduction Financing a significant expense such as a wedding involves multiple considerations beyond mere affordability, especially when tax implications are involved. Mary and Bob’s decision to finance their daughter’s wedding through a second mortgage, IRA withdrawal, or sale of the rental property necessitates analyzing each option’s immediate costs, long-term tax consequences, and overall impact on their financial position. This paper evaluates these options to determine the most tax-efficient method for financing their daughter’s wedding. Facts and Background Mary, aged 50, earning $65,000 annually, and Bob, aged 60, earning $75,000 annually, are married and own a home with $150,000 in equity. They have $80,000 in combined IRAs, and their rental property, with a basis of $20,000, can be sold for $120,000. Their primary goal is to finance a wedding costing $35,000, and they seek the most tax-efficient method among the three options: second mortgage, IRA withdrawal, or sale of the rental property. Analysis of Each Financing Option 1. Second Mortgage: The couple considers taking out a second mortgage at a 7% interest rate. The interest paid on a home equity loan is generally deductible if the loan proceeds are used to buy, build, or substantially improve the home. In this case, the loan proceeds are for a wedding, not for home improvement, limiting the deductibility of interest under IRS rules (IRC §163(h)). Moreover, the interest on a second mortgage is often considered personal interest and may not be deductible if the loan is not used for qualified purposes. Additionally, they would incur interest expenses that might not yield significant tax benefits. 2. IRA Withdrawal: Withdrawing $35,000 from their IRAs to pay for the wedding would result in taxable income for the year of withdrawal. Given their ages, they may be subject to a 10% early withdrawal penalty if under age 59½, unless an exception applies (IRC §72(t)). In their case, since Mary is 50, she would

Task 1: Accounting Internal Memo And Client Letter (300 Word

Task 1 Accounting Internal Memo 300 Words And Client Letter 300 Wo

Paper For Above instruction

Facts and Background

Analysis of Each Financing Option

Tax Implications and Recommendations

Conclusion

References