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Assignment Chapter 12 -Investing in Stocks and Bonds 4. Paying taxes on stocks What It Means to Invest in Stocks? Common stock is considered to be one of the most popular investment vehicles for long-term wealth building earn income from common stock in the form of dividends and/or capital gains. As an investor it is Investors important to understand the implications of investing in stocks from a tax perspective 7.97 per share. Last Two years ago, Xavier purchased 100 shares of a particular companys stock at a price of $10 year, Xavier received an annual dividend of $1.35 per share, and at the end of the year, a share of stock was trading at $108.10 per share. This year, xavier received an annual dividend of $1.49 per share and afterward sold all 100 shares at a price of $118.31 per share. In the first total capital gains at the end of each year column of the following table, enter the total annual dividends Xavier received each year, as well as the ppose Xavier is in the 28% tax bracket. Compute the taxes Xavier pays each year on dividends and capital gains from this investment by completing the second column in the table. Calculating Taxes Owed on Xaviers Investment Amount Taxes owed Year 1 Dividends: Capital Gains: [ Year 2Dividends:| Capital Gains:

The total amount of investment income (pre taxes) that Xavier earned on this investment over the course of 2 years is The total amount that Xavier pays in taxes on income from this investment income is

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Answer #1
Amount $ Taxes owed
Dividends 100*1.35 135 37.8 (135*28%)
Capital Gains 0 0 0
Dividends 100*1.49 149 41.72 (149*28%)
Capital Gains 100*(118.31-107.97) 1034 289.52 (1034*28%)
Xavier earned (pre-taxes) on this investment over the course of 2 years is 135+149+1034 = 1318
Xavier pays in taxes on income from this investment income is 37.80+41.72+289.52 = 369.04
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