Question 1 : Discuss the methods that can be used (as part of a plan) to transfer excess capital .

[20 marks] QuestionQuestion 2 : Discuss the range of strategies that can be used to monetize private business equity.

[20 marks] QuestionQuestion 3 : Design, analyse and appraise an insurance program.

[20 marks] QuestionQuestion 4 :

A) A wealth manager’s client has a £1,000,000 portfolio held in a taxable account. The end of the tax year is approaching and the client has realised £120,000 worth of capital gains. His portfolio has  securities that have experienced £80,000 of losses. These securities have not yet been sold and  their losses are therefore unrecognized. He could sell these securities and replace them with        similar securities expected to earn identical returns. The government taxes capital gains at 20       percent.

i.      Without making any further transactions, how much tax does the client owe this year?

[3 marks]

ii.      How much tax will he owe this year if he sells the securities with the £65,000 loss?

[3 marks]

iii.      How much tax will he save this year if he sells the securities with the £65,000 loss?

[4 marks]

B) In the previous exercise (4A), the securities with an unrealized loss have a current market value of £130,000 and cost basis of £190,000 (an unrealized loss of £80,000). The client could either hold  the securities with the unrealized loss, or sell the securities in the current tax year and replace       them with securities offering the same return. Assume that the next tax year (2019), the securities increase in value to £200,000 and the securities are sold regardless of which option the client        chooses.

i.      Calculate the client’s 2019 tax liability if he holds the securities until year end 2019.

[3 marks]

ii.      Calculate the client’s 2019 tax liability if he recognizes the loss in 2018, replaces them with securities offering the same return, and realizes the capital gain at year end 2019.

[3 marks]

iii.      Compare the total two-year tax liability under both options using the 2018 tax liability        computed in the previous exercise (4A). Assume that the 2018 tax liability was £20,000 if the loss was not realized and £10,000 if the loss was realized.

[4 marks]