How much she can expect to receive net of taxes

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Reference no: EM13501701

This client, Sally Thomson, has just received $1,000,000 from the sale of a clothing business and she wants to invest the proceeds in mutual funds. She is 44 years old and is currently unemployed. Her primary objective is to invest the proceeds from the business to generate an income of $60,000 per year before taxes. She may want to start another business at some point so she does not want to risk losing all of the money. Her risk profile is medium risk and she can tolerate a maximum annual decline in the portfolio of 10%. Her investment knowledge is low.

Required:

1. Create a mutual fund portfolio for Sally that uses at least four different mutual funds consistent with her risk and objectives. Explain the reasons for your recommendations and why the funds are suitable

2. Sally also wants to know how her investment income will be taxed and how much she can expect to receive net of taxes

3. If Sally wants to pay as little tax as possible what type of investment income should she generate on the portfolio and why? (4 marks).

4. What is Sally's marginal tax rate?

5. If she starts working and generates $60,000 of gross employment income what can she do to reduce/defer the taxes on the investment income?

Reference no: EM13501701

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