Brad (53) and Gwen (52) have been married for 32 years and decided to divorce due to irreconcilable differences. They have one grown child, Emilee, who lives away from home. Brad started his own insurance wholesale business 12 years ago. Gwen is a 50% partner in the business and helps with some clerical and administrative work. The business was valued at $485,000 by an independent appraiser. Gwen is currently in school to become a certified home health care provider. She will earn her certificate in two years and is expecting to get a job right away making $45,000 per year. Brad pays himself an average of $185,000 per year. Brad and Gwen's budget indicate that they each expect to spend $42,000 a year excluding housing. The family home is valued at $360,000 with a current mortgage balance of $120,000 and a monthly mortgage payment of $1,047. Gwen loves the house but understands that she might have to move into a smaller place. Five years ago, the couple inherited a brokerage account from Gwen's uncle valued at $315,000, including $115,000 in cash and the balance in ABC stock. The value of the stock was pretty flat in the first year. The current value of the account is $276,862 in stock and $27,280 in cash. The couple did not execute any trades in the account but used some of the cash and dividend in Brad's business. The portfolio has averaged $5,538 in dividends annually. Gwen has an IRA worth $52,000, and Brad's 401(k) is worth $225,000. Brad has an inflation protected pension from his old job (where he began working after he was married to Gwen). It will pay him a monthly benefit of $3,000 per month starting at age 65. Brad has a life expectancy of 26.29 additional years. The pension administrator indicated that the plan uses a discount rate of 3.53% and an inflation rate of 2%. The couple also has credit card debt of $15,800 which Brad offered to pay off himself. Brad offers Gwen the equity in the home, half of the brokerage account, and her IRA. 17. Alternatively, Brad can get a bank loan to buy Gwen's share in the business. He gives her the proceeds of the loan in a lump sum equal to one half of the value of the business. Which of the following is true? a. The bank loan payment to Gwen is 100% taxable in the year that it is received. b. The payment to Gwen is not taxable since it qualifies for IRC 1041 treatment. c. The couple can opt out of the tax free treatment pursuant to the divorce. d. Brad can deduct the application fee as an expense. 18. Based on the case facts, how much of the marital estate needs to be moved to Gwen's side of the ledger to reach 50% of the marital estate? a. $353,415 b. $444,071 c. $780,282 d. $834,212 19. If Gwen is concerned with being financially secure in the short term, she should: a. Ask for 100% of the brokerage account. b. Ask for some of Brad's pension. c. Ask for Brad's 401(k) plan since she can access that money tax free using 71(t)(2)(c). d. Stop going to school and wait tables at the local diner. 20. The couple starts discussing spousal support and Gwen asks her financial professional to generally describe how alimony is determined. Which of the following is not a consideration? a. Need/ability to pay b. Health of the receiving spouse c. Education and work experience of the receiving spouse d. Fault of the paying spouse 21. Based on Brad's offer, what percent of income will he have? a. 100% b. 99% c. 76% d. 50% 22. Which of the following methods of dividing pension benefits should be a last resort for Brad and Gwen? a. Present value b. Deferred division c. Reserved jurisdiction d. Cash-out method 23. How much is Gwen's current income? a. $0 b. $2,769 c. $45,000 d. ($51,795) 24. Which of the following should a financial professional review, in addition to Brad and Gwen's tax returns? a. Social Security numbers on the tax return b. Paystubs c. W-2s and 1099s d. Charitable contribution receipts 25. Based on the case facts, what is Gwen's need in spousal support in the first year? a. $51,795 b. $54,564 c. $2,769 (monthly) d. $0