Paying back 200K in three years?

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lawfool
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Re: Paying back 200K in three years?

Postby lawfool » Thu May 07, 2009 12:24 pm

Dick Whitman wrote:
lawfool wrote:
trojans09 wrote:Finance person here with something else to consider. Interest is completely tax-deductible. With this new administration people in BigLaw will likely be taxed at at least 50%. This means your interest tax shield cuts the effective interest rate from 6.8% to 3.4%, hardly a high cost of capital. So to sum up, you can write off interest payments which just means you will be paying a lot less taxes.


You can claim the deduction if all of the following apply:

1. You paid interest on a qualified student loan in tax year 2008
2. Your filing status is not married filing separately
3. Your modified adjusted gross income is less than $70,000 ($145,000 if filing jointly)
4. You and your spouse, if filing jointly, cannot be claimed as dependents on someone else's return

http://www.irs.gov/taxtopics/tc456.html


There should be a phaseout, so hopefully we will still be able to deduct part of it.



I don't believe so. Get ready to be taxed to death

You are going to deduct $90k off $160k? I know you have a lot of good accountants but that seems difficult. :?

Even then it is phased out. You would still need to hit MAGI of $55k to have the full impact.

---

Effect of the Amount of Your Income on the Amount of Your Deduction

The amount of your student loan interest deduction is phased out (gradually reduced) if your modified adjusted gross income (MAGI) is between $55,000 and $70,000 ($115,000 and $145,000 if you file a joint return). You cannot take a student loan interest deduction if your MAGI is $70,000 or more ($145,000 or more if you file a joint return).

http://www.irs.gov/publications/p970/ch ... k100020913

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misteranthro
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Re: Paying back 200K in three years?

Postby misteranthro » Thu May 07, 2009 12:27 pm

Table 4-2.Effect of MAGI on Student Loan Interest Deduction

IF your filing status is... AND your MAGI is... THEN your student loan interest deduction is...
single,
head of household, or qualifying widow(er) not more than $55,000 not affected by the phaseout.
more than $55,000
but less than
$70,000 reduced because of the phaseout.
$70,000 or more eliminated by the phaseout.
married filing joint return not more than $115,000 not affected by the phaseout.
more than $115,000
but less than $145,000 reduced because of the phaseout.
$145,000 or more eliminated by the phaseout.

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heyyitskatie
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Re: Paying back 200K in three years?

Postby heyyitskatie » Thu May 07, 2009 12:28 pm

lawfool wrote:
I don't believe so. Get ready to be taxed to death

You are going to deduct $90k off $160k? I know you have a lot of good accountants but that seems difficult. :?

Even then it is phased out. You would still need to hit MAGI of $55k to have the full impact.

---

Effect of the Amount of Your Income on the Amount of Your Deduction

The amount of your student loan interest deduction is phased out (gradually reduced) if your modified adjusted gross income (MAGI) is between $55,000 and $70,000 ($115,000 and $145,000 if you file a joint return). You cannot take a student loan interest deduction if your MAGI is $70,000 or more ($145,000 or more if you file a joint return).

http://www.irs.gov/publications/p970/ch ... k100020913


Almost makes me want to join the teabaggers. Almost.

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casper13
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Re: Paying back 200K in three years?

Postby casper13 » Thu May 07, 2009 12:43 pm

LawandOrder wrote:I plan to open a bakery in NYC as a front to launder money from my heroin & amphetamine operations to pay back the debt in 3 years.

Solid plan.



I have a car dealership if you want in and the bakery doesnt pan out, always looking for new clients to "Buy some cars"

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bilbobaggins
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Re: Paying back 200K in three years?

Postby bilbobaggins » Thu May 07, 2009 12:55 pm

There are some very interesting assumptions going on in this thread:

1. You'll be expected to have a "lavish" lifestyle as an entering associate at a firm. Sure, you'll be expected to dress well (within reason) and go out to bars/restaurants with coworkers/clients on occasion, but that's about it. Hardly extravagant.

2. I don't know about NYC, but $3000 a month is more than doable for a city like SF or DC in terms of living expenses. $2500 will take some scrimping, but it's certainly not impossible.

3. A big law job in a secondary market will pay similarly well, but you'll be in a city with a greatly reduced COL. One of these markets will make it easier.

But...as has been said, if the interest isn't horrible, it doesn't always make sense to burden yourself with paying off the debt as quickly as absolutely possible.

andol469
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Re: Paying back 200K in three years?

Postby andol469 » Thu May 07, 2009 1:38 pm

trojans09 wrote:You can get an accountant's help to manipulate all the deductions below that 70k level.


$130,000 of deductions...?

daisyduck
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Re: Paying back 200K in three years?

Postby daisyduck » Thu May 07, 2009 1:39 pm

As for maintaining a frugal lifestyle while working BigLaw:
I'm not a biglaw associate yet, so I can't say for sure (as none of us 0Ls can) but I don't think I'll have a problem parting with the herd of lavish spenders of the BigLaw world. They spend too much anyway. Just because you make more doesn't mean you have to increase your expenses. I understand there will be unavoidable costs like getting new suits, socializing with colleagues and clients, like someone said or gifts for friends and family, but the largest chunk of your expenses will be rent and taxes (esp in nyc, where i plan to work). Living in a cheap apt and not buying a fancy new car as most new yuppies do are the main ways to reduce spending without "being anti-social and weird."

As for loan repayment calculation:
Extremely generally and simply speaking for the sake of the 'big picture', if i pay back about $5500 a month for three years, that amounts to about 200K. Even with a high effective APR, that is about how much my debt will be after graduation.
Now, with a salary of 160K+bonus (which is of course subject to reduction, ITE. but big pic guys, big pic), even after various taxes of say 40%, you will still see 8K/mo. That means I have $2,500 to cover rent, utilities, food, clothes and other expenses. I can't speak for anyone else but that is enough for me. I currently live on less than that as a recent graduate in a major east coast city, and still manage to save a couple hundred bucks a month.

So... I think it's certainly doable. Of course, I'm not going to pay exactly $5,500 every month. There will be lots of unexpected costs like say medical expenses, unexpected travel + million other things that always creep up, but if I put all extra dollars into repayments (CitiAssist Law Loan doesn't penalize you for prepayments, and reduces your interest rate by .25% if you do automatic repayments), I CAN DO IT! HOORAHHH!

2009 Prospective
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Re: Paying back 200K in three years?

Postby 2009 Prospective » Thu May 07, 2009 2:02 pm

daisyduck wrote:As for maintaining a frugal lifestyle while working BigLaw:
I'm not a biglaw associate yet, so I can't say for sure (as none of us 0Ls can) but I don't think I'll have a problem parting with the herd of lavish spenders of the BigLaw world. They spend too much anyway. Just because you make more doesn't mean you have to increase your expenses. I understand there will be unavoidable costs like getting new suits, socializing with colleagues and clients, like someone said or gifts for friends and family, but the largest chunk of your expenses will be rent and taxes (esp in nyc, where i plan to work). Living in a cheap apt and not buying a fancy new car as most new yuppies do are the main ways to reduce spending without "being anti-social and weird."

As for loan repayment calculation:
Extremely generally and simply speaking for the sake of the 'big picture', if i pay back about $5500 a month for three years, that amounts to about 200K. Even with a high effective APR, that is about how much my debt will be after graduation.
Now, with a salary of 160K+bonus (which is of course subject to reduction, ITE. but big pic guys, big pic), even after various taxes of say 40%, you will still see 8K/mo. That means I have $2,500 to cover rent, utilities, food, clothes and other expenses. I can't speak for anyone else but that is enough for me. I currently live on less than that as a recent graduate in a major east coast city, and still manage to save a couple hundred bucks a month.

So... I think it's certainly doable. Of course, I'm not going to pay exactly $5,500 every month. There will be lots of unexpected costs like say medical expenses, unexpected travel + million other things that always creep up, but if I put all extra dollars into repayments (CitiAssist Law Loan doesn't penalize you for prepayments, and reduces your interest rate by .25% if you do automatic repayments), I CAN DO IT! HOORAHHH!


I'm not so sure that $2,500 / month is going to be enough to live comfortably in NYC (esp. Manhatten) IMO unless you are living a bare bones type lifestyle. I'm not so sure how realistic some people are on this board when it comes to tallying up all the various expenses that add up.

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paratactical
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Re: Paying back 200K in three years?

Postby paratactical » Thu May 07, 2009 2:04 pm

2009 Prospective wrote:I'm not so sure that $2,500 / month is going to be enough to live comfortably in NYC (esp. Manhatten) IMO unless you are living a bare bones type lifestyle. I'm not so sure how realistic some people are on this board when it comes to tallying up all the various expenses that add up.


I am living in NYC on around 1500 a month and I don't live a bare bones lifestyle.

Leeroy Jenkins
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Re: Paying back 200K in three years?

Postby Leeroy Jenkins » Thu May 07, 2009 2:04 pm

LawandOrder wrote:I plan to open a bakery in NYC as a front to launder money from my heroin & amphetamine operations to pay back the debt in 3 years.

Solid plan.

It was until you posted it online.

imchuckbass58
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Re: Paying back 200K in three years?

Postby imchuckbass58 » Thu May 07, 2009 2:06 pm

daisyduck wrote:As for maintaining a frugal lifestyle while working BigLaw:
I'm not a biglaw associate yet, so I can't say for sure (as none of us 0Ls can) but I don't think I'll have a problem parting with the herd of lavish spenders of the BigLaw world. They spend too much anyway. Just because you make more doesn't mean you have to increase your expenses. I understand there will be unavoidable costs like getting new suits, socializing with colleagues and clients, like someone said or gifts for friends and family, but the largest chunk of your expenses will be rent and taxes (esp in nyc, where i plan to work). Living in a cheap apt and not buying a fancy new car as most new yuppies do are the main ways to reduce spending without "being anti-social and weird."

As for loan repayment calculation:
Extremely generally and simply speaking for the sake of the 'big picture', if i pay back about $5500 a month for three years, that amounts to about 200K. Even with a high effective APR, that is about how much my debt will be after graduation.
Now, with a salary of 160K+bonus (which is of course subject to reduction, ITE. but big pic guys, big pic), even after various taxes of say 40%, you will still see 8K/mo. That means I have $2,500 to cover rent, utilities, food, clothes and other expenses. I can't speak for anyone else but that is enough for me. I currently live on less than that as a recent graduate in a major east coast city, and still manage to save a couple hundred bucks a month.

So... I think it's certainly doable. Of course, I'm not going to pay exactly $5,500 every month. There will be lots of unexpected costs like say medical expenses, unexpected travel + million other things that always creep up, but if I put all extra dollars into repayments (CitiAssist Law Loan doesn't penalize you for prepayments, and reduces your interest rate by .25% if you do automatic repayments), I CAN DO IT! HOORAHHH!


I say all the more power to you, and agree that it can be done.

A couple words of caution though:

-Biglaw is getting harder and harder to get. About a third of NYU has been deferred for a year, and 2L OCI is shaping up to be a massacre from what I hear, even at T6s (my 1L friend at Columbia said consensus seems to be you need to be top 50% to be safe, rather than top 80% in past years). Do not know where you are going, but this is something to take into account.

-It is entirely possible (likely?) by the time we graduate that market rate in New York will be $145,000, with a much lower bonus than in past years. Some firms are already there.

-I do not know if you live in New York or another city, but I cannot emphasize enough that New York is really, really, really expensive to live in. From having lived elsewhere, easily twice as expensive anywhere else in the country I've been except perhaps San Fran. If you're trying to live on $2,500 per month, you simply will not be able to live in manhattan below 96th street (and thus will have a 30+ minute commute to work). The average one bedroom in manhattan (all of it, including harlem and washington heights) rents for $3,000 (post real estate bubble). NYU dorms go for 1,600, and they're literally tiny dorm rooms subsidized by the university.

I think it's a good thing to aspire to pay off your loans in three years, but I would not count on it. That is, you shouldn't put yourself in a situation where if something came up, you'd be screwed with a longer repayment period.

imchuckbass58
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Re: Paying back 200K in three years?

Postby imchuckbass58 » Thu May 07, 2009 2:07 pm

paratactical wrote:
2009 Prospective wrote:I'm not so sure that $2,500 / month is going to be enough to live comfortably in NYC (esp. Manhatten) IMO unless you are living a bare bones type lifestyle. I'm not so sure how realistic some people are on this board when it comes to tallying up all the various expenses that add up.


I am living in NYC on around 1500 a month and I don't live a bare bones lifestyle.


Where?

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paratactical
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Re: Paying back 200K in three years?

Postby paratactical » Thu May 07, 2009 2:10 pm

imchuckbass58 wrote:
paratactical wrote:
2009 Prospective wrote:I'm not so sure that $2,500 / month is going to be enough to live comfortably in NYC (esp. Manhatten) IMO unless you are living a bare bones type lifestyle. I'm not so sure how realistic some people are on this board when it comes to tallying up all the various expenses that add up.


I am living in NYC on around 1500 a month and I don't live a bare bones lifestyle.


Where?


I live in Astoria. I have a 15 minute subway ride to work. It's closer to midtown Manhattan than lots of places actually in Manhattan; the apartments are bigger; and I get to have a lawn.

daisyduck
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Re: Paying back 200K in three years?

Postby daisyduck » Thu May 07, 2009 2:10 pm

paratactical wrote:
2009 Prospective wrote:I'm not so sure that $2,500 / month is going to be enough to live comfortably in NYC (esp. Manhatten) IMO unless you are living a bare bones type lifestyle. I'm not so sure how realistic some people are on this board when it comes to tallying up all the various expenses that add up.

I am living in NYC on around 1500 a month and I don't live a bare bones lifestyle.

You go paratactical!!! lol
2009 Prospective, $2,500/mo is about $50,000-$60,000 in salary terms. There are PLENTY of people that make that much and live in Manhattan (non-profit employees, teachers, paralegals..).

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paratactical
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Re: Paying back 200K in three years?

Postby paratactical » Thu May 07, 2009 2:12 pm

daisyduck wrote:
paratactical wrote:
2009 Prospective wrote:I'm not so sure that $2,500 / month is going to be enough to live comfortably in NYC (esp. Manhatten) IMO unless you are living a bare bones type lifestyle. I'm not so sure how realistic some people are on this board when it comes to tallying up all the various expenses that add up.

I am living in NYC on around 1500 a month and I don't live a bare bones lifestyle.

You go paratactical!!! lol
2009 Prospective, $2,500/mo is about $50,000-$60,000 in salary terms. There are PLENTY of people that make that much and live in Manhattan (non-profit employees, teachers, paralegals..).


Thanks! I'm making $40k + OT and I've paid of 3/4 of my UG student loans and I will have enough by the time I get ready to go to LS to put a down payment on a house. (I'm applying in the fall, class of '13)

Leeroy Jenkins
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Re: Paying back 200K in three years?

Postby Leeroy Jenkins » Thu May 07, 2009 2:16 pm

paratactical wrote:Thanks! I'm making $40k + OT and I've paid of 3/4 of my UG student loans and I will have enough by the time I get ready to go to LS to put a down payment on a house. (I'm applying in the fall, class of '13)

:shock:

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paratactical
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Re: Paying back 200K in three years?

Postby paratactical » Thu May 07, 2009 2:18 pm

Lxw wrote:
paratactical wrote:Thanks! I'm making $40k + OT and I've paid of 3/4 of my UG student loans and I will have enough by the time I get ready to go to LS to put a down payment on a house. (I'm applying in the fall, class of '13)

:shock:


*shrug* Growing up pretty darn poor makes you good at managing money? I dunno. I feel spectactularly rich right now the way I'm living. I go out when and where I want. I buy my friends drinks and can take people out to dinner. I took my parents to Luger's when they came to visit. I feel like I live really luxouriously.

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Re: Paying back 200K in three years?

Postby imchuckbass58 » Thu May 07, 2009 2:20 pm

paratactical wrote:
imchuckbass58 wrote:
paratactical wrote:
2009 Prospective wrote:I'm not so sure that $2,500 / month is going to be enough to live comfortably in NYC (esp. Manhatten) IMO unless you are living a bare bones type lifestyle. I'm not so sure how realistic some people are on this board when it comes to tallying up all the various expenses that add up.


I am living in NYC on around 1500 a month and I don't live a bare bones lifestyle.


Where?


I live in Astoria. I have a 15 minute subway ride to work. It's closer to midtown Manhattan than lots of places actually in Manhattan; the apartments are bigger; and I get to have a lawn.


Astoria is actually a quite nice place to live. And I'll echo Daisy and say this is pretty impressive (what with the UG loans, down payment, etc).

But I stand by my conviction that you will not live in Manhattan below 96th (which is fine). $2,500/month is a lot more like $40,000 pretax ($30,000 post-tax, because the brackets are lower), and there are very, very few people at that income level living in manhattan (and most of them are married). 95% of the teachers, paralegals and non-profit workers I know live in Brooklyn or Queens. Hell, a lot of the bankers and consultants I know live in brooklyn or queens.

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kurama20
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Re: Paying back 200K in three years?

Postby kurama20 » Thu May 07, 2009 2:24 pm

Hell no. The more I hear about NYC cost of living the more I think living in that city really doesn't make since unless you have family from there, or you are pulling in big dough ( like 360K plus). I think I'll stick with Atlanta, Charlotte, Texas, hell even DC and live a lot better. 145K in Atlanta and you're living like a king. Half the stuff people worship NYC for you can't even enjoy unless you're making a TON of money.

Leeroy Jenkins
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Re: Paying back 200K in three years?

Postby Leeroy Jenkins » Thu May 07, 2009 2:30 pm

paratactical wrote:*shrug* Growing up pretty darn poor makes you good at managing money? I dunno. I feel spectactularly rich right now the way I'm living. I go out when and where I want. I buy my friends drinks and can take people out to dinner. I took my parents to Luger's when they came to visit. I feel like I live really luxouriously.

That wasn't the source of my :shock: I mean, what type house are we talking about here

wraaaa
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Re: Paying back 200K in three years?

Postby wraaaa » Thu May 07, 2009 2:30 pm

you really dont have to live in manhattan. parts of queens and brooklyn have a lot to offer and are great for young professionals. its much cheaper, the apartments can be just as nice, and the commute can be just as quick.

daisyduck
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Re: Paying back 200K in three years?

Postby daisyduck » Thu May 07, 2009 2:32 pm

imchuckbass58 wrote:A couple words of caution though:

-Biglaw is getting harder and harder to get. About a third of NYU has been deferred for a year, and 2L OCI is shaping up to be a massacre from what I hear, even at T6s (my 1L friend at Columbia said consensus seems to be you need to be top 50% to be safe, rather than top 80% in past years). Do not know where you are going, but this is something to take into account.

-It is entirely possible (likely?) by the time we graduate that market rate in New York will be $145,000, with a much lower bonus than in past years. Some firms are already there.

-I do not know if you live in New York or another city, but I cannot emphasize enough that New York is really, really, really expensive to live in. From having lived elsewhere, easily twice as expensive anywhere else in the country I've been except perhaps San Fran. If you're trying to live on $2,500 per month, you simply will not be able to live in manhattan below 96th street (and thus will have a 30+ minute commute to work). The average one bedroom in manhattan (all of it, including harlem and washington heights) rents for $3,000 (post real estate bubble). NYU dorms go for 1,600, and they're literally tiny dorm rooms subsidized by the university.

I think it's a good thing to aspire to pay off your loans in three years, but I would not count on it. That is, you shouldn't put yourself in a situation where if something came up, you'd be screwed with a longer repayment period.

Very, very, and very good points. Thanks :)
I should probably shoot for top 30%-50% of the class. and I do think that the market rate in 2012 will be lower than 160K, with different bonus expectations.
And yeah I couldn't agree with you more about NYC being ridiculously expensive. Groceries and transportation alone cost at least twice more than any other US cities. Don't get me started on city taxes.

But for housing, there is definitely some wiggle room. I don't HAVE to live in a "nice" area in my 20s or shun the possibility of having roommates. I've lived around Columbia before, I paid $750/mo for a spacious-by-nyc-standards room, with one other suitemate. I plan on doing that, maybe a room for around $1,000/mo in Morningside Heights area or Brooklyn while paying off my loans. So I don't know. I definitely will have to spend more than $2,500 on some months, of course, but I think it's a pretty good budget.

Rock of Love
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Re: Paying back 200K in three years?

Postby Rock of Love » Thu May 07, 2009 2:36 pm

kurama20 wrote:Hell no. The more I hear about NYC cost of living the more I think living in that city really doesn't make since unless you have family from there, or you are pulling in big dough ( like 360K plus). I think I'll stick with Atlanta, Charlotte, Texas, hell even DC and live a lot better. 145K in Atlanta and you're living like a king. Half the stuff people worship NYC for you can't even enjoy unless you're making a TON of money.




+1 and it's colder than most cities in the South, Midwest, and West.

imchuckbass58
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Re: Paying back 200K in three years?

Postby imchuckbass58 » Thu May 07, 2009 2:43 pm

Yeah, sorry Daisy, I don't mean to be argumentative/difficult. It's just some people on this board seem not to have an idea of what "real life" entails and what things cost. It seems like you have a good handle on this though. I think you should be fine.

Kurama, as for whether COL in New York is worth it, I think it's a personal preference thing. I maintain that New York is a lot of fun and offers unique benefits even if you're not making ridiculous amounts of money. New York isn't just about models and bottles, or living on Fifth Avenue. There's a lot to be said by the sheer cultural diversity, access to anything you could ever want to do in a city (free or not), and the sheer energy and vibrancy that the size and centrality of the city brings.

That said, I can definitely see why many people would rather keep the money and live somewhere else.

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Kohinoor
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Re: Paying back 200K in three years?

Postby Kohinoor » Thu May 07, 2009 2:55 pm

So... anyone considering defecting to whichever political party would tax them least in 3 years?




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