Homework Answers
BASED ON THE QUESTION IT IS IMPORTANT TO UNDERSTAND THE TWO TERMS , LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN
AN INVESTMENT IS CONSIDERED TO BE A LONG TERM CAPITAL GAIN IF THE INVESTOR HOLD THE STOCKS FOR MORE THAN ONE YEAR. LONG TERM CAPITAL GAINS ARE TAXED SEPARATELY AND SPECIFIC RATES (0%,15% AND 20%)
IF THE INVESTMENT FOR ONE YEAR ONLY,IT IS TERMED AS SHORT TERM CAPITAL GAIN AND IS TAXED ALONG WITH THE REGULAR INCOME AND USUALLY IT MAY LEAD YOU TO A HIGH TAX SLABS.
IN THIS QUESTION , INVESTOR IS AFRAID ABOUT THE DECLINE IN STOCK PRICE.
NOW TAKE A LOOK AT WHAT HAPPEN IF YOU SELL THE STOCK IN DECEMBER 2019
YOU PURCHASED THE 300STOCK@ 125 PER SHARE =$37500
IF YOU SELL IT @180/SHARE = 300*180= $54000
SHORT TERM CAPITAL GAIN = 54000-37500= $16500
YOUR TAXABLE INCOME IS $50000+16500=$66500
TAX APPLICABLE IS $12892
IF YOU RETAIN THE STOCK AND SELL IT IN 2020,
300*115=34500 THAT IS YOU COULD SUFFER A LOSS OF $3000
SO IT IS PREFERABLE TO SELL THE SHARES IN DECEMBER 2019 . BUT KEEP IN MIND THAT STOCK MARKET CONDITIONS ARE UN PREDICTABLE .IF THE STOCK PRICE REMAINS IN @180 OR A NEAREST FIGURE ,YOU COULD GET THE BENEFIT OF LONG TERM CAPITAL GAIN BENEFITS IN THE NEXT YEAR .
THANK YOU
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Your 2019 federal tax refund (liability) would be closest to: a. ($456) b. ($245) c. ($244)...
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to:
a. ($456) b. ($245) c. ($244) d. ($1)
e. $318
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)...
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e. $318
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a. $27.50 b. $28.16 c. $29.29 d. $50.83 e. $52.50
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