Question

Use the following information from questions 6-12. In both 2018 and 2019 you expect to receive a W2 for $200,000; $65,000 will be already withheld on your W2 for federal income taxes and your income tax bracket is 32%. The short term capital gains on investments (<1 year) are taxed like income, long term capital gains on investments (> 1 year) are taxed at 15%, and dividends are taxed at 22%. Besides your W2 income, the only income you have to report is from one stock on the 1099-B issued by your broker: On January 1t, 2018, you purchased 100 shares of stock at $50 per share; you based your investment decision on publically available sources which speculate the share's price will increase dramatically at some point over the next two years July 1, 2018, is the ex-dividend date for the stock -that morning you received a special onetime cash dividend of $2 per share and the stock closed at $48 per share . On November 29h, 2018, the company announced great news about a clinical drug trial and the share price begins to rise . On November 30h, 2018, you purchased 20 shares of stock at $80 per share On December 1, 2018, there was a 2 for 1 stock split .On December 2nd, 2018, you sold 50 shares of stock at $100 per share On January 2, 2019, you sold 70 shares at $90 per share You do not t receive any dividends in 2019 .On December 31, 2019, you sell any remaining shares at $30 per share All stock prices quoted above are at market close on the day referenced Assume shares that were purchased first were sold first (i.e. FIFO) Assume there are no transaction costs 10. After the sale of the stock on December 2nd, 2018, your cost basis per share is closest to: a. $27.50 b. $28.16 c. $29.29 d. $50.83 e. $52.50 11. Your 2018 federal gross income (W2 wages, capital gains, and dividends) would be closest to: a. $203,736 b. $203,825 c. $203,936 d. $203,950 e. $207,450 12. Your 2019 federal tax refund (liability) would be closest to: a. ($456) b. ($245) c. ($244) e. $318

Answer 1

1. Result as per calculation coming as below, answer provided is different

		$
1st Jan	Purchased 100 shares at $50 per share	5,000
1st Jul	Less: Dividend $2 per share	-200
30th Nov	Purchased 20 shares at $80 per share	1600
	Total cost of 120 shares	6,400
1st Dec	Stock split of 2 for 1 shares
	Total number of shares now	240
2nd Dec	Less: Sold 50 shares at $100 per share	-5000
	Cost of Remaining Shares 190 shares	1,400
	Cost per share	7.37

2.

	$
W2	2,00,000
Add: Income from Dividend	200
Add: Income from Sale of 50 shares at a gain of $75	3750
2018 Gross Federal income	2,03,950
Gain per share calculation:
Share purchased at $50 intially
Stock split 2 shares for 1, so effect cost of 1 share $25
Sold at $100, so gain is $75

3.

	2019	$
2nd Jan	Sold 70 shares @ 90 per share	6300
	Cost price of 70 shares @ $25 per share	1750
	Gain on sale of 70 shares	4550
	Tax @ 32%	1366
31st Dec	Sold 120 shares @ 30 per share	3600
	Cost price of 120 shares @ $25 per share	3000
	Gain on sale of 120 shares	600
	Tax @ 15%	90
	Tax on W2 @ 32%	64000
	Tax Withheld	65000
	Tax Liability	-456