Harry and Sally, two individual taxpayers with no tax knowledge, come to you in early 2019 for a tax planning consultation. Based on the information you gathered from your meeting with Harry and Sally (outlined below), complete the following:

A. Identify the tax considerations covered in this course that are likely to be applicable to Harry and Sally over the next 5 years (January 2019 December 2023).

B. Briefly explain each concept and its relevance.

C. Provide any relevant tax planning advice/suggestions for Harry and Sally.

Limit your answer to material covered in this course. You can assume that all tax laws, tax brackets, income limits, thresholds, etc. from 2018 will remain consistent through 2023. If you need to assume any additional facts, clearly identify what facts were assumed and keep your assumptions reasonable. I do not expect you to make any calculations or tax liability projections for the taxpayers as the main point of this question is to identify what concepts are applicable and briefly explain the relevance. However, you can use sample calculations to explain concepts if that is helpful.

Below are the facts you gathered from your meeting with Harry and Sally.

1. Harry (27) and Sally (28) are engaged. The wedding date has not been set, but it will be December 2019 or January 2020. Neither has been married before, and they do not currently have children or other dependents.
2. Harry and Sally live and work a state with high income taxes and high property taxes. They currently rent an apartment, but plan to buy a home soon.
3. Harry is a high school teacher and makes approximately $40,000/year. Harry plans to leave his job within the next year to start a sports marketing company (sole proprietorship) in which he will materially participate. Harry will need to purchase over $200,000 in business-use only office furniture once he starts his sports marketing business. Harry expects that the sports marketing firm will generate very little income the first two years, but after that, he anticipates being able to net over $200,000/year in profit (based on financial accounting, not tax accounting). He is uncertain whether he will hire any employees. In addition, Harry also plans to go back to school in the near future to earn a Masters degree in Sports Marketing from an accredited university, but he isnt sure if he should do so before or after starting his new business. Harry has been told there are many tax benefits for education.
4. Sally recently started a new job as an account manager, where she makes approximately $150,000/year (nearly twice her previous salary). Sally will be required to travel extensively in her new position, but she is uncertain whether or not her employer will reimburse such expenses and, if so, what their reimbursement policies are.
5. Harry and Sally plan to start having kids in 1-2 years. They both will continue working once they have kids, and the kids will attend daycare while Harry and Sally work.
6. Neither Harry nor Sally is currently saving anything for retirement. Their employers offer 401(k) plans, but neither participates in the plans as they dont understand the benefits. Harrys friend also mentioned that Harry and Sally should open an Eyera or a Roth Eyera something like that, but Harry wasnt sure what his friend was talking about.
7. The couple plans to buy a $200,000 starter home this month and use a mortgage to fund the purchase. They plan to live in the for a short time, and then upgrade to a larger, more expensive ($1M - $1.5M; 20% down payment and the rest through a mortgage) home once they start having kids in the next 1-2 years. The starter home is likely to significantly appreciate in value over the first 2 years. Once they purchase a new home, Harry and Sally will either sell the starter home or convert it to a rental property. If it is converted to a rental, rental income for the foreseeable future will likely be $12,000/year; mortgage payments will be $10,000/year, taxes will be $2,000/year and maintenance will be around $1,000/year. Half the value of the property is the land, and the other half is the structural improvements (house).
8. Both Harry and Sally have always taken the standard deduction in the past. They dont know how itemized deductions work or what expenses are possibly deductible.
9. Harry and Sally each donate $2,000/year to charity because Sallys personal trainer told her that charitable contributions are tax deductible. Harry and Sally dont know exactly what that means or how the donations benefit them on their taxes.
10. Sally has been paying around $1,000/year in student loan interest. She has enough money in savings to pay off her student loan, but she hasnt paid it off because she heard that there are tax benefits to paying student loan interest.
11. Harry received a federal income tax refund of $4,000 in 2019 (for his 2018 federal income tax return), but Sally had to pay an additional $300 in federal income taxes when she filed her 2018 federal income tax return in 2019. Harry and Sally each received a state income tax refund in 2019 (for their 2018 state income tax returns). Harrys refund was $500; Sallys refund was $200.
12. Sallys father, Dave, is elderly, and he is not expected to live more than 1 year. Dave owns a parcel of land in Cupertino that he purchased in 1975 for $50,000. The land is now worth $2,000,000. Dave wants the land to go to Sally, but Sally is not sure whether she should have Dave gift her the land now or wait to inherit the land when Dave passes away. Dave also owns some shares of stock (FMV = $150,000; Daves AB = $250,000). Sally is not sure from a tax perspective whether she should have Dave (i) gift the stock to Sally now, (ii) wait for Sally to inherit the stock, (iii) sell the stock to Sally, or (iv) sell the stock to an unrelated third party and give the cash to Sally. Assume the land and stock will not change in value between now and the date of Daves death.