Your new financial planning clients are Howard and Wanda. They are in their early thirties and have two young children, Bob (age 3) and Genevieve (age 1). Wanda makes $125,000 per year and Howard makes $125,000 per year. Wanda just received $1 million in life insurance when her grandfather died.

They have come to you for advice on how to invest the $1 million and minimize the amount of income tax that they have to pay. They want to save for retirement and for their children's college education. For purposes of this Project, assume that interest and dividends will be at 5% per year and municipal bonds pay 4% per year. They pay State and Local Taxes at 10% per year ($25,000). They are willing to donate up to $10,000 per year to charity and can be flexible about the timing of the donations. They do not have any significant medical bills. They do not currently own a home but would consider buying a home. Assume whatever other facts you want for the assignment. For example, they could change from being employed to opening a business, but their income level must stay at $250,000.

Your paper should be at least three pages long. First, calculate the amount of income tax that they will pay without any planning. Remember, in addition to their salaries, with the $1 million invested at 5%, the couple will also have $50,000 of interest income, for a total of $300,000 of annual income.

• Use different tax savings strategies: lowering or deferring income; taking advantage of lower tax rates when applicable; maximizing deductions when possible.
• Calculate the tax savings from your plan over more than just one year, but assume the same tax rate in future years.
• If a technique results in a deferral of income tax (rather than avoidance), explain how long the tax can be deferred.

Ratings 4.0 pts Income Tax Paper Criteria Basic Requirements and Readability Did the per the basic requirements! at least 3 pages and have fewerbergical errors Werecision and used appropriately! Une ariety of tax saving device Where all of the different tax strategies reviewed Lowering or deferring Income Taking advantage of lower tax rate and Max deduction and credits 4.0 pts Did the per demonstrate an understanding of the tax concepts show independent analysis of the tax provisions offerative solutions for reducing te explore how Howard and Wand could change their behavior to accomplish their goals of (t) saving for college and retirement and 2 wering their come te 4.0 pts 3.0 pts Where the potential tax savings cated correctly! Viere potential tax swings over more than one year discuted Total Point 15.0 Ratings 4.0 pts Income Tax Paper Criteria Basic Requirements and Readability Did the per the basic requirements! at least 3 pages and have fewerbergical errors Werecision and used appropriately! Une ariety of tax saving device Where all of the different tax strategies reviewed Lowering or deferring Income Taking advantage of lower tax rate and Max deduction and credits 4.0 pts Did the per demonstrate an understanding of the tax concepts show independent analysis of the tax provisions offerative solutions for reducing te explore how Howard and Wand could change their behavior to accomplish their goals of (t) saving for college and retirement and 2 wering their come te 4.0 pts 3.0 pts Where the potential tax savings cated correctly! Viere potential tax swings over more than one year discuted Total Point 15.0