1. Sargon is single and has taxable income of $175,000 without considering the sale of a capital asset (land held for investment) in October of 2017 for $30,000. That asset was purchased five years earlier and has a tax basis of $10,000. The tax liability applicable to only the capital gain (without consideration of the additional Medicare tax) is
A) $1,000.
B) $3,000.
C) $5,600.
D) $7,000.
2. Katie and Ryan would both like to retire at age 60.
a) Katie turned 25 today. She would like to retire at age 60. If she starts investing $5,000 annually starting one year from now, with her last investment made on her 60th birthday, how much will she have at age 60 if she earns 5% compounded annually on her money? Show/explain your work.
b) Ryan turned 30 today. He would like to retire at age 60. If he starts investing $5,000 annually starting one year from now, with his last investment made on his 60th birthday, how much will he have at age 60 if he earns 5% compounded annually on his money? Show/explain your work.
c) In comparing the answers to a) and b), what conclusion do you draw?