INVESTMENTTAXATION INVESTMENT TAXATION

previously taxed dollars previously taxed dollars = dollars not taxed dollars not taxed on the sell, withdrawal or liquidation of a capital asset on the sell, withdrawal or liquidation of a capital asset or GOOGLE INC. $ 10,000 $ 40,000 Purchase Price Selling Price $ 30,000 Capital Gain BIG BANK SAVINGS ACCOUNT $ 10,000 $ 20,000 Deposits Withdrawal $ Capital Gain $ 10,000 Interest Cost Basis / Tax Basis = $10,000 Cost Basis / Tax Basis = $20,000 INVESTMENT TAXATION

GOOGLE INC. $ 10,000 $ 40,000 Purchase Price Selling Price $ 30,000 Reportable Capital Gain BIG BANK SAVINGS ACCOUNT $ 10,000 $ 28,000 Deposits Withdrawal $ Reportable Gain on Withdrawal $ 18,000 Interest Cost Basis / Tax Basis = $10,000 Cost Basis / Tax Basis = $20,000 MUTUAL FUND INC. $ 10,000 $ 70,000 Investments Liquidation $ 40,000 Reportable Gain $ 5,000 Dividends Cost Basis / Tax Basis = $30,000 $ 15,000 Capital Gains Distributions previously taxed dollars previously taxed dollars = dollars not taxed dollars not taxed on the sell, withdrawal or liquidation of a capital asset on the sell, withdrawal or liquidation of a capital asset or

1. Savings Account / CD 2. Municipal Bond 3. Bond 4. Stock 5. Mutual Fund 6. Annuity 7. IRA / 401(k) 8. Roth IRA 401(k) 9. HSA 10. Life Insurance + Wages INCOME + Interest + Dividends + Capital Gain Income + IRA Distributions + 401(k) Distributions + Annuity Distributions + Real Estate Income ADJUSTMENTS - HSA Contributions - SEP Contributions - IRA Contributions - Itemized Deductions - Personal Exemptions - 401(k) Contributions = Taxable Income INVESTMENT TAXATION Health Savings Account S.E.P. Contributions I.R.A. Contributions

Savings Account /CD $25,000 $5,000 $30,000 Tax on Withdrawal $0 Contribution Interest - Ordinary Inc Black Border = Ordinary Income Taxed White Border = Capital Gains Taxed No Border = Hasn’t Been Taxed INVESTMENT TAXATION 1. Savings Account / CD 2. Municipal Bond 3. Bond 4. Stock 5. Mutual Fund 6. Annuity 7. IRA / 401(k) 8. Roth IRA 401(k) 9. HSA 10. Life Insurance

Municipal Bond $25,000 $5,000 $50,000 $20,000 $20,000 Capital Gain Contribution Unrealized Gain Interest - Ordinary Inc - Tax Exempt Tax on Liquidation INVESTMENT TAXATION 1. Savings Account / CD 2. Municipal Bond 3. Bond 4. Stock 5. Mutual Fund 6. Annuity 7. IRA / 401(k) 8. Roth IRA 401(k) 9. HSA 10. Life Insurance Black Border = Ordinary Income Taxed White Border = Capital Gains Taxed No Border = Hasn’t Been Taxed

Bond $25,000 $5,000 $50,000 $20,000 $20,000 Capital Gain Contribution Unrealized Gain Interest - Ordinary Inc Tax on Liquidation INVESTMENT TAXATION 1. Savings Account / CD 2. Municipal Bond 3. Bond 4. Stock 5. Mutual Fund 6. Annuity 7. IRA / 401(k) 8. Roth IRA 401(k) 9. HSA 10. Life Insurance Black Border = Ordinary Income Taxed White Border = Capital Gains Taxed No Border = Hasn’t Been Taxed

Stock $25,000 $10,000 $55,000 $20,000 $20,000 Capital Gain Contribution Unrealized Gain Dividend - Ordinary Inc - Cap Gain Tax on Liquidation INVESTMENT TAXATION 1. Savings Account / CD 2. Municipal Bond 3. Bond 4. Stock 5. Mutual Fund 6. Annuity 7. IRA / 401(k) 8. Roth IRA 401(k) 9. HSA 10. Life Insurance Black Border = Ordinary Income Taxed White Border = Capital Gains Taxed No Border = Hasn’t Been Taxed

Mutual Fund $25,000 $10,000 $75,000 $20,000 $20,000 Capital Gain Contribution Unrealized Gain Dividend - Ordinary Inc - Cap Gain Interest - Ordinary Inc Cap Gain Dist - Cap Gain $5,000 $15,000 Tax on Liquidation INVESTMENT TAXATION 1. Savings Account / CD 2. Municipal Bond 3. Bond 4. Stock 5. Mutual Fund 6. Annuity 7. IRA / 401(k) 8. Roth IRA 401(k) 9. HSA 10. Life Insurance Black Border = Ordinary Income Taxed White Border = Capital Gains Taxed No Border = Hasn’t Been Taxed

Annuity $25,000 $10,000 $75,000 $50,000 $20,000 Ordinary Income Contribution Unrealized Gain Dividend - Ordinary Inc Interest Cap Gain Dist $5,000 $15,000 Tax on Liquidation INVESTMENT TAXATION 1. Savings Account / CD 2. Municipal Bond 3. Bond 4. Stock 5. Mutual Fund 6. Annuity 7. IRA / 401(k) 8. Roth IRA 401(k) 9. HSA 10. Life Insurance Black Border = Ordinary Income Taxed White Border = Capital Gains Taxed No Border = Hasn’t Been Taxed

IRA / 401(k) $25,000 $10,000 $75,000 $75,000 $20,000 Ordinary Income Contribution Unrealized Gain Dividend Interest Cap Gain Dist $5,000 $15,000 Tax on Liquidation INVESTMENT TAXATION 1. Savings Account / CD 2. Municipal Bond 3. Bond 4. Stock 5. Mutual Fund 6. Annuity 7. IRA / 401(k) 8. Roth IRA 401(k) 9. HSA 10. Life Insurance Black Border = Ordinary Income Taxed White Border = Capital Gains Taxed No Border = Hasn’t Been Taxed

Roth IRA 401(k) $25,000 $10,000 $75,000 $0 $20,000 Contribution Unrealized Gain Dividend - Ordinary Inc Interest Cap Gain Dist $5,000 $15,000 Tax on Liquidation INVESTMENT TAXATION 1. Savings Account / CD 2. Municipal Bond 3. Bond 4. Stock 5. Mutual Fund 6. Annuity 7. IRA / 401(k) 8. Roth IRA 401(k) 9. HSA 10. Life Insurance Black Border = Ordinary Income Taxed White Border = Capital Gains Taxed No Border = Hasn’t Been Taxed

HSA $25,000 $10,000 $75,000 $20,000 Contribution Unrealized Gain Dividend Interest Cap Gain Dist $5,000 $15,000 $0 Ordinary Income If Qualified Medical Expense $75,000 Tax on Liquidation INVESTMENT TAXATION 1. Savings Account / CD 2. Municipal Bond 3. Bond 4. Stock 5. Mutual Fund 6. Annuity 7. IRA / 401(k) 8. Roth IRA 401(k) 9. HSA 10. Life Insurance Black Border = Ordinary Income Taxed White Border = Capital Gains Taxed No Border = Hasn’t Been Taxed

Life Insurance $25,000 $10,000 $75,000 $20,000 Contribution Unrealized Gain Dividend - Ordinary Inc Interest Cap Gain Dist $5,000 $15,000 $0 If Withdrawn - Ordinary Income If Borrowed From Cash Value $50,000 Tax on Liquidation INVESTMENT TAXATION 1. Savings Account / CD 2. Municipal Bond 3. Bond 4. Stock 5. Mutual Fund 6. Annuity 7. IRA / 401(k) 8. Roth IRA 401(k) 9. HSA 10. Life Insurance Black Border = Ordinary Income Taxed White Border = Capital Gains Taxed No Border = Hasn’t Been Taxed

+ Wages INCOME + Interest Municipal Bond Interest + Dividends + Capital Gain Income + IRA Distributions + 401(k) Distributions + Annuity Distributions + Real Estate Income ADJUSTMENTS - HSA Contributions - SEP Contributions - IRA Contributions ADJUSTED GROSS INCOME - Itemized or Standard Deductions - Personal Exemptions = TAXABLE INCOME Black Border = Ordinary Income Taxed White Border = Capital Gains Taxed No Border = Hasn’t Been Taxed INVESTMENT TAXATION

TAXATION OF INVESTMENTS ContributionIncomeCapital Gains Taxed in year earned Life Insurance Investment Annuity After tax dollars Stocks / Bonds / Savings Accounts / Certificates of Deposit / Mutual Funds Municipal Bonds Traditional IRA and 401k ROTH IRA and ROTH equivalent 401k Health Savings Accounts (HSA) After tax dollars Pre-tax dollars (no federal, state, or FICA tax) Pre-tax dollars After tax dollars Tax exempt Interest & Dividend – ordinary income tax rates Capital Gains – capital gains tax rates Tax deferred No tax on withdrawal Tax deferred Tax exempt if borrowed from policy Tax deferred - if withdrawn taxed as ordinary income Tax exempt if used for qualified medical expenses Tax deferred if used for non- medical expenses - taxed as ordinary income Taxed as Capital Gain Taxed as Ordinary Income No tax on withdrawal Tax exempt if borrowed from policy Tax deferred - if withdrawn taxed as ordinary income Tax deferred if used for non-medical expenses – taxed as ordinary income Taxed as Capital Gain Tax exempt if used for qualified medical expenses INCOME+-ADJUSTMENTS=AGI- Deductions- Personal Exemptions= TAXABLE INCOME Taxed as Ordinary Income