TAX 9900 Lecture Notes - Lecture 51: Moral Hazard, Life Insurance, Coronavirus
Class 4/15
Publish lec + slides for remaining slides
He will tell us chapters being covered
He will be doing weekly session to go through questions
He will be putting hw questions
Chapters to be covered: 8,9,10,11,12,13,15
Moral v Morale Hazard
• Grey area as to whether moral or morale hazard
• Conceptually: think about it like this
• Moral = if you’ve done something intentionally
• Morale = if you’re just completely indifferent
• Key concept is when you and counterparty enter into agrmt (liek insurance contract) that
everybody needs to be aware of info @ same level
• If one party has more info than the other then not a fair contract
• If enter into K, and not operating in good faith = moral hazard
Articles Published:
1. Suspension of mortgage payments
a. If somebody is in dire strings due to corona, having flexibility to put off mortgage
pmts is very useful
b. Step 1: Determine if your mortgage is held by Fannie Mae or Freddie Mac
c. Step 2: if it is, then you take a look @ mortgage companies website to see what
they are providing
i. In his case, he has ability to put off pmt for 2months but at end of 2mo
period you must make lump sum pmt for 3 months @ same time
d. Diff mortgage companies are offering slightly diff solutions
2. Should I stock up on investment portfolio
. Equity values are low
a. Stock market has “corrected” what that means is:
.If you already own stocks, and value has gone done: do u sell or hold onto it?
i.Does this present a buying opp? Perhaps
ii.If you have opp to rebalance investment portfolio btw equity and debt
1. If equity gone down then its possible to sell debt to rebalance and
get back in that ratio
iii.Dividend yields are up
1. Dividend amount as a % of value of share of stock
2. If the value of stock went down then div. Yield has gone up
3. Whether you should wait to file taxes
. Filing from indiv perspective; may be entitled to refund then file immediately and get
refund right away
a. May push filing+pmt deadline to oct 15/april 15 of 2021
4. Stimulus payments
. Stimulus pmts: fed govt/IRS is sending out pmts to all US taxpayers in the max amt of
1200/per person
.Limitations related to AGI and they start to phase out btw 75,000-99,000
5. Couple that are FAQs: individuals/small businesses
. Unemployment benefits: depends on what state you worked in
.Expansion to provide 600/week on top of state benefits
1. Unclear who is eligible
a. If eligible for unemplyt then eligible for 600
a. Student loans: fed govt has waived 2 months of student loan pmts
.Freeze accrual of interest until sep 30th
i.Wont have a bigger balance than before
Req. min distr. from IRA has been pushed off
• Also able to withdraw 100k from IRA or 401k penalty free as long as its for coronavirus
specific hardship
Charitable contributions
• Cash contr to 50% org is now subject to 100% AGI limit
• Only for 2020!
Small biz
Essentially two main types of programs providing loans to biz
Document Summary
He will be doing weekly session to go through questions. If one party has more info than the other then not a fair contract. If enter into k, and not operating in good faith = moral hazard. Stock market has corrected what that means is: Yield has gone up: whether you should wait to file taxes. Filing from indiv perspective; may be entitled to refund then file immediately and get refund right away. May push filing+pmt deadline to oct 15/april 15 of 2021: stimulus payments. Stimulus pmts: fed govt/irs is sending out pmts to all us taxpayers in the max amt of. limitations related to agi and they start to phase out btw 75,000-99,000: couple that are faqs: individuals/small businesses. Unemployment benefits: depends on what state you worked in. expansion to provide 600/week on top of state benefits: unclear who is eligible. If eligible for unemplyt then eligible for 600.
