Tax Formulas

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abushey31

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Does anyone have a good way of memorizing the Tax formulas? I’m looking at you, Charitable Gratuitous Transfers RV formula. Anyone? Bueller? Bueller?
 
start with the FV Gift/FV Bequest
Charitable ones is the one with the income tax advantage I believe.
I remember that as
[1+r]^n x Toi [SAME]/[SAME]
In other words, the only difference between that and a non-charitable gift is the [1+r]^n x Toi… the remainder of the equation is the same as the other taxable gifts.
 
(1+r)n + t ordinalx (1+r(1-t))n (1-t estate)/ (1+r(1-t))n (1-t estate
you should know three benefits
escape estate tax , investment tax free , tax duduction
 
The denominator is the same on all of them, [1+re(1-tie)]^n(1-Te)
I use the second formula with [1+rg(1-tig)]^n(1-Tg) as my base. This assumes the donee pays the tax.
For a tax free gift, remove (1-Tg).
Donor pays tax, add +Tg*Te after (1-Tg). So it should be (1-Tg+Tg*Te).
Charitable gift adds (1+rg)^n+Toi in front. So it should look like (1+rg)^n+Toi[1+rg(1-Tig)]^n(1-Tg)]
 
Question about taxable gifts. I know it’s a matter of when it’s gifted. Schweser notes have the more intuitive:
{(1+r(1-income tax)(1- gift tax)}^n
where the gift tax is applied at the present time.
CFA Text shows the formula as:
{(1+r(1-income tax)}^n(1- gift tax)
which is exactly the same as the FV of a bequest using a bequest tax.
CFA text states that the Relative value of a taxable gift would reduce down to (1- gift tax)/ (1- bequest tax). That would hold true with Schwesers formula.
Any thoughts?
 
sorry guys, mixing up where the parenthesis are.
regardless though, I’m still not seeing why a gift tax would be applied at the end of an investment period and not immediately applied to the principal when gifted. But at this point it may be best to follow the formula and move on…
 
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