Case Study:

Mr. Lo is 56, a member of management broad in a private university at a monthly salary of $120,000. His wife, Mrs. Lo aged 48, is a merchandising officer of a trading company with a monthly salary of $30,000 and she only makes mandatory contributions to her MPF schemes. However, Mr. Lo makes voluntary contributions of $10,000 per month to the Qualifying Tax Deductible MPF schemes in addition to the mandatory contributions. They have one daughter, 13 years old, studying in a local secondary school.

They recently live in a self-occupied apartment valued at $8,000,000. They still have the mortgage payment with the amount of $1,200,000. The current monthly mortgage payment is $18,500 paid by Mr. Lo. The mortgage interest rate is P 2.5% and the prime rate is fixed at 5%. Apart from the mortgage payment, the monthly expense for the family is $58,000 which includes the monthly allowance to their parents.

Mr. Los employer provides excellent fringe benefits, including group life insurance equal to 2 times Mr. Los annual salary, group disability insurance and adequate family medical insurance. The beneficiary of Mr. Los group life insurance is Mrs. Lo. Mr. and Mrs. Lo do not have any personal life insurance policy. Currently they have no will.

Mr. Lo expects to be retired at 60 due to university regulations. He holds i-bonds and blue-chips stocks which valued around $500,000. Mr. and Mrs. Lo currently have saving of $1,000,000 in their bank account.

Question 1

(i) Would you suggest Mr. and Mrs. Lo to purchase their own life insurance policies?

(ii) Discuss the advantages and disadvantages of term life insurance.

(iii) If Mr. Lo died today, how much would Mrs. Lo get from Mr. Los group life insurance? Would that be enough for her? Why?

(iv) What would you advise Mr. and Mrs. Lo on investment aspects?

Question 2

(i) Explain the differences between tax avoidance and tax evasion.

(ii) Compute the amount of salaries tax payable (excluding provisional tax and tax reduction) by the taxpayer with the following additional data, if

Choice 1: Mr. and Mrs. Lo elect separate assessments

Choice 2: Mr. and Mrs. Lo elect joint assessments

Parents Mr.	Los Mother: Aged 80 Mrs. Los Parents: Aged 78 & Aged 76 (Both parents live separately)
Donations	$60,000 cash
Mortgage interest	$55,660 paid during the assessment year

iii) Should Mr. and Mrs. Lo elect joint assessment? Explain.

(iv) Discuss In the aims of reducing the tax payable, Qualifying Annuity Premiums is preferable than Qualifying Tax Deductible MPF schemes.