WK 2 homework

# 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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