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FrankCFA

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Does home belong to investable asset?
Quote from CFA 2013 AM
Assets
The Voorts own their home, valued at USD 1,250,000, mortgage-free. They have a taxable
investment portfolio with a current market value of USD 2,500,000. This portfolio has no
previous tax liability due in the coming year. Thomas received a lump-sum USD 10,000,000
payment from the sale of his business; his cost basis is zero. The net proceeds of the sale will be
added to the Voorts’ investment portfolio. Their goals are to grow the asset base of the portfolio
over time to maintain its after-tax purchasing power and to establish and maintain a cash reserve
of USD 250,000.
 
From my experience of the CFA curriculum and the practice questions, i have seen that there is no fixed rule if house should be considred part of investible assets. Having said that, my opinion is that wherever its to be considered a part of investible assets, its specificially mentioned in the caselet, else I would not consider it part of investible assets.
 
Thanks. I aslo find no fixed rule ….so a bit confused.
 
HOME IS NEVER A PART OF INVESTABLE ASSETS. Go back and look at every paper. Home is ALWAYS excluded.
 
^ absoluetly. There’s a specific section in the text that says to acknowldege it but do not include it in the investable assets.
You CAN however use it to match long-term liquidity needs during retirement.
 
Thanks cpk, Galli,
Quotes from 2007 CFAI AM Answer guideline.
“The value of the house has been removed from the return calculation as it will be donated.”
Does it imply if it doesn’t donate, shoule be included in the investable asset?
 
Need more context to answer that, what other information is provided about the house?
 
See below in bold.

Jack and Ruth Ingram, each 50 years old, live in Canada and have recently retired. Jack worked for much of his career at Pitt Manufacturing, a publicly traded, small-capitalization (small-cap) Canadian firm. Jack has agreed to join Pitt’s board of directors without compensation. The Ingrams are in good health and have adequate medical insurance coverage.
Jack has accumulated Pitt common stock currently valued at C$1,000,000 through the company’s employee stock ownership program. Since the Pitt stock has appreciated significantly in recent years, Jack’s holdings have a low average cost basis. Pitt stock and options on the Pitt stock are traded in active and liquid markets on a national exchange.
The Ingrams have recently inherited C$2,400,000 net of taxes consisting mostly of small-cap Canadian equities. The inheritance, the Pitt stock Jack has accumulated, and C$800,000 in bonds and cash equivalents represent their total financial assets. The Ingrams live in a house with a market value of C$1,250,000. They have decided to donate the house to a provincial park upon their death.

Q:
A. Prepare the nominal pre-tax return objectives of an investment policy statement (IPS) for the Ingrams. Show your calculations.
 
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