There are many tax rules and regulations you should be aware of when investing-whether it be in stocks; bonds; mutual funds;real estate; or collectibles such as artwork, antiques, gems, memorabilia, stamps, and coins. Capital gains are proceeds derivedfrom these types of investments. Unless they are specified as being tax-free, such as municipal bonds, you must pay capital gainstaxes on these proceeds.Capital gains are taxed in one of two ways. If the investment is held for one year or less, this is considered short-term and istaxed as ordinary income at your regular income tax rate. As this is written, if the investment is held for more than one year, it isconsidered long-term and qualifies for various tax discounts, as follows for single taxpayers with earnings as shown below.Capital Gains RatesStocks HeldUp to $38,700$38,700-$426,700Over $426,700Over 1 year0%15%20%(long-term)(a) If you are in the 23% tax bracket for ordinary income and have a 15% capital gains rate, how much tax will you save (in $)by waiting for an investment to become long-term before selling it if your taxable profit from this investment is $35,000?2$(b) How much will you save (in $) if you are in the 35% tax bracket for ordinary income and have a 20% capital gains rate?$

Capital gains are the appreciation in the stock price. Example, You buy at $100 each share and after…

(a) If you are in the 23% tax bracket for ordinary income and have a 15% capital gains rate, how much tax will you save (in $) by waiting for an investment to become long-term before selling it if your taxable profit from this investment is $35,000? 24 (b) How much will you save (in $) if you are in the 35% tax bracket for ordinary income and have a 20% capital gains rate?

(a) If you are in the 23% tax bracket for ordinary income and have a 15% capital gains rate, how much tax will you save (in $) by waiting for an investment to become long-term before selling it if your taxable profit from this investment is $35,000? 24 (b) How much will you save (in $) if you are in the 35% tax bracket for ordinary income and have a 20% capital gains rate?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Your friend just got their $14446 tax return. They would like to invest it into a stock that they think will earn 11.7% on average. How many years until they have $22105? Answer:
Please help me with e and f. Thanks!
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Suppose your friend is being considered for a promotion at work. The promotion is expected to provide your friend an extra 10,000 dollars per year in salary. However, your friend does not want the promotion, because he just looked at his tax return and saw that if he were to earn just 5000 more per year in taxable income, it will push him into a higher tax backet. What should you tell you friend? 1) You are an idiot. Never turn down money, because tax brackets are applied 2) You should arrange for the promotion to only increase the salary by 5000 3) The decision is a logical application of NPV concepts 4) None of these are correct
Let's assume you live in a country with a progressive tax system that has the following tax brackets: • 0% on income up to $10,000 • 10% on income between $10,001 and $50,000 • 20% on income between $50,001 and $100,000 • 30% on income above $100,000 Suppose your annual income is $75,000. How much tax do you pay? a. $10,000 b. C. d. $7500 $8500 $9000
You bought a 5-year property class equipment for $20,000.00 and sold it after 3 years. Assume that the selling price of the equipment decreases uniformly by 5% each year. The equipment generated following income: $5,000, $5,500, and $4,500 in years 1 through 3, respectively. 5. Fill up the table below to show the after tax cash flow. Assume that you are already in the 28% income tax bracket. Use MACRS depreciation. Assume that depreciation recapture/loss is taxed at 15%. After tax cash flow Yr. Income Depreciation Таxable Income Income Тах b) Write down the equation to determine the after tax rate of return. DO NOT compute the rate of return.
Suppose you are in the 33% income tax bracket. You own shares in Carefree Casinos, whose profits are taxed at a 25% rate. “Double taxation” means: A. Carefree pays 25% tax on before-tax profits, then another 25% tax is applied to its after-tax profits. B. Carefree pays 25% tax on its before-tax profits, then another 33% tax is applied to its after-tax profits. C. Carefree pays 25% tax on before-tax profit and 33% on its retained earnings, and you pay 33% tax on dividends which are distributed to you. D. Carefree pays 25% tax on before-tax profit but 0 tax on its retained earnings, and you pay 33% tax on dividends which are distributed to you. E. Carefree pays 25% tax on before-tax profit and 25% on its retained earnings, and you pay 33% tax on dividends which are distributed to you.
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