The case is about Krishna, who has just started his professional career and is wondering what strategy to follow to maximize his after-tax wealth. He did not have any experience in managing his finances and wanted to plan for his taxes and increase his after-tax wealth. The case includes Krishna’s income statement, balance sheet, profile, goals, assumptions, and tax rules. The tax rates are standard in structure but differ in important ways such as age and income and thus require careful analysis and scenario analysis of the proposed calculations.
The first objective of the case is to give students easy yet comprehensive access to tax planning. For this purpose, the case text sets the stage and the context that students need to discuss, using the case exhibits. A large part of class discussion will be devoted to tax planning. The case will familiarize the students with various aspects of tax planning and how they differ on many dimensions. Students should also realize that even though the exhibits provide some information, wealth after tax would be different, as many factors in the exhibits could influence Krishna’s decision. Students will also learn the use of scenario analysis to understand the implication of tax.
The second objective of the case is to analyze the strategy that Krishna should employ and how he could best achieve his objective, i.e., to maximize his after-tax wealth. This is the most important part of the class exercise.