In this case you are presented with a fact pattern for a taxpayer with various

In this case you are presented with a fact pattern for a taxpayer with various tax planning needs. Given the tax facts and the financial situation of this
individual you are to answer several questions regarding his tax status and to evaluate how he might apply the various strategies and tactics described in
this assignment to improve his tax situation.

CASE NARRATIVE

Paul Stephowski is a single 39-year old attorney with a medium-sized law firm in Philadelphia. He earned $49000 this year and anticipates that his earnings
will substantially increase within the next few years.

Paul entered the legal profession later than most attorneys. He spent 5 years in the Navy before entering college at the age of 24. After graduating from
college with a degree in English he worked as an editor at Harper House publishers. At the age of 31 he was accepted at William Mitchell School of Law and
completed his law study 3 years later. He passed the bar exam immediately after graduation and went to work for a large law firm in his hometown. After 2 years
he quit this firm and joined a smaller firm where he felt he had more opportunity for advancement. He has been with this firm for 3 years and plans to make his
career there.

Paul rents an apartment downtown one block from his office. He enjoys the city lifestyle and especially likes being able to walk to work in 5 minutes any time
of the day or year. He finds it very convenient when entertaining clients or potential clients. Paul belongs to the downtown YMCA and to the Main Line Golf and
Racquet Club both of which he uses principally for recreation although he does occasionally entertain clients or prospective clients at each of the clubs.

Paul has accumulated a modest portfolio of assets consisting of $25200 in municipal bonds $31500 in stock $7900 in a NOW account and $11000 in zero
coupon bonds maturing in 15 years for $50000. He saved very little while in the Service and has only recently finished repaying his student loans for law
school. Although he enjoys a fairly comfortable lifestyle he has some concerns that he may not be investing an adequate proportion of his earning to provide
the financial security he desires. He also feels that as his income rises his tax burden is becoming excessive. The facts he presents are as follows:

Personal facts

Salary $49000 Single

No dependents

Investment Facts

Dividends 900

Interest on CDs (redeemed early) 475

Long-term capital gain 13370

Short-term capital loss 2405

Interest on municipal bonds 1764

Early withdrawal penalty on CD 213

Other Facts

State sales tax 515

Contribution to charity 3427

Received for writing a magazine article 50

Winnings in contest 90

Fees paid to professional organizations 203

Paid for continuing education requirements

of state bar 370

Received as damage award for physical

injuries in an auto accident that occurred

the previous year 2200

Attended a 3-day National Lawyers Guild

conference in Palm Springs in February;

stayed an additional 2 days for a short

golfing vacation

Round-trip airfare 450

Registration fee 1000

Car rental fees ($32/day) 160

Meals ($42/day) 210

Greens fees and cart rental 100

Room ($110/day) 550

Dues and Fees at Main Line Golf and Racquet

Club 1875

Dues and fees at YMCA 350

Federal tax withheld 14750

State and local taxes withheld 2460

Medical premiums 420

Requirements for Answering the Case

On the basis of the facts as presented answer the following questions. (You need not be familiar with all the specific tax forms used when actually filing the
return.)

1. Determine total income (from all sources).

2. List the exclusions from income.

3. List the adjustments to income.

4. Compute the adjusted gross income.

5. List the deductions from income.

6. Compute the taxable income.

7. Compute the taxes payable.

8. How might Paul improve his tax situation?