I cannot for the life of me remember these tax formulas. Since I can’t find a problem in CFA tests that actually asks me to calculate the Total tax or effective capital gains tax or charitable donation, should I spend any of the waning last days memorizing this?
these are the worst. curious as well
Some people on this site claiming past exam questions are unlikely to repeat… some people claiming because it’s never been on the exam they don’t have to study it…
I guess we’ll find out who’s right
I had the exact same frustration. Try this: start out with the intial dollar investment, then go through each individual step in the taxation timeline. For example, start with the $1,000,000, then reduce it by the gift tax. Label the remaining amount “amount left to son”. Then apply the (1+r)(1-T) and all that, labeling that “FV after-tax amount after son’s tax rate”, and so on. If you do that in individual steps, you’re golden. Then do the same for the denominator.
After a while, you start to understand why they just use $1 instead of the dollar amount in the question, but do it the long way for three or four iterations.
In case it’s a “Donor Pays Tax” thing, it gets more complicated. But with 8 days left, screw it.
I hope they test this so I will have at least 3 more points than you. =)
Simle way to charitable = (1+r)^n/ Value of Bequest + Toi (tax on ordinary income)