Your response will be graded on the accuracy of your answers, but also on your critical thinking and analysis of this case and on your ability to understand the problem, to identify options, and to prepare a recommendation. A rubric is attached to this folder that will be used for grading. Read the requirements and the rubric carefully before you write so that you understand the purpose of this project.

Your client, Maria, sent you an email to request an appointment with you for year-end tax planning. Assume that it is now mid-November. You are happy that she called you before the end of the year because there may be some options to help to reduce her tax cost. She heard something about underpayment penalties, but is not sure about the requirements.

By way of background, she tells you that she has had an exceptional year, income-wise. Her salary at this point in time is already at $150,000, and she anticipates a $50,000 bonus to be paid before the end of the year. She is also worried that the company may not have withheld enough federal and state income tax on her paychecks, but she is not really sure.

In addition, the value of her investment portfolio has grown well during the year and she has several equity investments that have doubled in value at this point. Unfortunately, she also has two other holdings that have declined significantly in value and are probably never going to bounce back. In fact, these two securities are no longer actively traded on the securities exchanges. Her unrealized appreciation in her portfolio is approximately $75,000, including both short-term and long-term holdings. Her unrealized (LT) loss on the two holdings is approximately $25,000. She is concerned that equity prices may fall going into next year.

She has thought about putting money into a retirement plan, perhaps an IRA account, but has never gotten that started. She did start making contributions to her company's 401K plan, but she has only put in $200 per month this year. Her company matches 50% of employee contributions to the 401K plan up to 3% of compensation. She has the option to choose a traditional, deductible 401 k plan or a Roth 401 k plan. Her current contributions are going into the deductible 401 k plan. She can make changes each year between the traditional deductible 401k or the Roth 401k option.

She really does not anticipate having this high of an income level in the foreseeable future. Her income is likely to return to between $80,000 and $120,000.

She itemizes deductions, primarily because she has mortgage interest for the mortgage on her primary residence. She would also like to make a significant contribution to her church either

this year or in January of next year because this has been an exceptional year for her. She is thinking about contributing $20,000.

She does not have any investments that generate AMT adjustments, so you can ignore AMT for Maria.

For this case, identify and evaluate some options for Maria. There is no single right or wrong answer, but there are likely some things that Maria can do in the next 6 weeks that would be beneficial tax-wise. Follow the pattern for doing a critical thinking case: identify the problem, identify and evaluate options, and then analyze the options to develop a recommendation for strategies for Maria. You should support any recommendations using the resources in the textbook and also consider IRS publications, such as pub 17, or other relevant high-quality sources of information. Be sure to vet any sources that you use. Your communication to Maria should be clear and professional.