Amanda received a $300,000 inheritance on May 1st,20X2.With the proceeds,she purchased the following investments:
1)Two rental properties: Property A has a value of $85,000,of which $40,000 is allocated to the building.Property B has a value of $110,000,of which $60,000 is allocated to the building.The properties earned $9,750 in rental income before CCA.The capital growth of the two buildings combined is expected to be 5%.
2)A bond: Valued at $50,000 with 10% annual interest paid at maturity
3)Portfolio shares: Worth $10,000 - Eligible dividends in the amount of $700 were paid to Amanda before the end of the year.The capital growth of the shares is expected to be 3%.
4)The remainder of the money was applied to her $150,000 mortgage.
Amanda is in a personal marginal tax bracket of 45%.Her marginal tax rate for dividends is 21%,and her marginal tax rate for capital gains is 23%.
Required:
A)Calculate Amanda's minimum property income for 20X2.
B)Calculate the annual pre-tax yield (as a percentage)for each of the three investments.
C)Calculate the after-tax yield (as a percentage)for each of the three investments.
D)Briefly explain the tax benefit that Amanda could have realized had she used her inheritance to pay off her mortgage and then borrowed funds to make the above investments.
Correct Answer:
Verified
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q1: Joanne owns a rental property,which she purchased
Q2: Martha Shine owned the following in 20X4:
•
Q3: Jim Smith owns two rental properties which
Q4: A public corporation earns $500,000 in pre-tax
Q5: Which of the following is true concerning
Q6: Which of the following statements concerning the
Q8: On March 1,20X1,Notes Inc.purchased a two-year guaranteed
Q9: Pear Corporation earned $150,000 of pre-tax income.The
Q10: Stella Flier has received an inheritance of
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents