WK 2 homework - FINC 354 Chapter 5 Question 1 a An individual in the 28 federal income tax bracket and 15 long-term capital gains tax bracket

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FINC 354 Chapter 5 Question 1: a) An individual in the 28% federal income tax bracket and 15% long-term capital gains tax bracket brought and sold the following securities during the year: Cost basis of stock Proceeds of sale ABC $24,500 $28,600 = $4,100 gain DEF $35,400 $31,000 = $4,400 loss GHI $31,000 $36,000 = $5,000 gain $4,700 gain What are the taxes owned on the short term proceeds? $4,700 x 28% = $1,316 additional taxes owed b) An individual in the 35% federal income tax bracket and 15% long-term capital gains tax bracket brought and sold the following securities during the year: Cost basis of stock Proceeds of sale ABC $34,600 $28,600 = $6,000 loss DEF $29,400 $31,000 = $1,600 gain GHI $21,500 $19,000 = $2,500 loss $6,900 loss What are the taxes owned or saved as a result of these sales? There is a $6,900 loss, however only $3,000 of that loss may be used to offset income and the rest is a carry over to the next year. Therefore, the $3,000 loss will result in a $1,050 tax savings; $3,000 x 35% Question 2: An investor is in the 33% tax bracket and pays long-term capital gains taxes of 15%. What are the taxes owed (or saved in the cases of losses) in the current tax year for each of the following situations? a) Net short-term capital gains of $3,000; net long-term capital gains of $4,000 Short term capital gains: $3,000 x .33 = $990 Long term capital gains: $4,000 x .15 = $600 Total additional tax: $1,590 b) Net short-term capital gains of $3,000; net long-term capital losses of $4,000 Long term capital loss: $4,000 Short term capital gain: -$3,000 $1,000 long term loss x .33 Total tax savings: $330 c) Net short-term capital losses of $3,000; net long-term capital gains of $4,000 Long term capital gain: $4,000 Short-term capital loss: -$3,000
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FINC 354 $1,000 long term gain x .15 Total additional tax: $150 d) Net short-term capital gains of $3,000; net long-term capital losses of $2,000 Short term capital gain: $3,000 Long term capital loss: $2,000 $1,000 short term gain x .33 Total additional tax: $330 e) Net short-term capital losses of $4,000; net long-term capital gains of $3,000 Short term capital loss: $4,000
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This note was uploaded on 04/01/2012 for the course FINC 354 taught by Professor Gibbons-cobb during the Spring '12 term at Columbia College.

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WK 2 homework - FINC 354 Chapter 5 Question 1 a An individual in the 28 federal income tax bracket and 15 long-term capital gains tax bracket

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