Question

If Julia Diaz is single and in the 35% tax bracket, calculate the tax impact of each of the following security transactions. (Use the IRS regulations for capital gains in effect in 2018.) EXHIBIT 3.2 Capital Gains Tax as of 2018 Short-term gains from the sale or exchange of property investment assets not used in a business) and held for less than 12 months are taxed at the same rates as ordinary income (10%, 12%, 22%, 24%, 32%, 35%, and 37%). Long-term gains from the sale or exchange of property held for more than 12 months are taxed as follows: Ordinary Tax Rate Alternative Capital Gains Tax Rate 10% or 12% 0% 22%, 24%, 32%, or 35% 15% 37% 20% Treat each of the following cases as independent of the others. a. She sold stock for $3,175 that she purchased for $2,500 6 months earlier. Round the answer to the nearest cent. Tax savings should be preceded by a "." sign. b. She sold bonds for $4,400 that she purchased for $3,500 4 years earlier. Round the answer to the nearest dollar. Tax savings should be preceded by a "." sign. c. She sold stock for $2,920 that she purchased for $4,000 6 months earlier. Assume this to be the only Stock in Arabella's portfolio. Round the answer to the nearest cent. Tax savings should be preceded by a "." sign.

Answer 1

Julia Diaz is single and in 35% tax bracket

Part A :

Since only 6 months has passed, the gain is short term capital gain

Short term capital gain = 3,175 - 2,500 = 675

Tax = 675 x 35% = 236.25

Part B :

Since the period is more than 12 months, the gain is long term capital gain

Long term capital gain = 4,400 - 3,500 = 900

Tax = 900 x 15% = 135

Part C :

Only 6 months has passed from the date of purchase, so the resultant loss is short term capital loss

Short term capital loss = 4,000 - 2,920 = 1,080

Tax savings = 1,080 x 35% = 378

It should be mentioned like "-378" because it is tax savings