A taxpayer can invest $10,000 in a taxable 10-year bond that yields an annual pretax return of 6 percent or buy land (a capital asset) for $10,000 that is expected to increase at an annual pre-tax rate of 4 percent. The taxpayer expects to hold the bond and the land for 10 years and expects to pay capital gains taxes of 20 percent when the land is sold. The taxpayer’s marginal tax rate on ordinary income is expected to be 25 percent throughout the 10-year period.

Q: Suppose that Ramos contributes $5000/year into a traditional IRA earning interest at the rate of…

A: Amount deposit every years (PMT) = $3700 Interest rate earned on deposit ( r) = 5% Number of periods…

Q: What is the payback if the investment is $22,000 and the after tax benefits are: Years 1 & 2 =…

A: Investment amount = $ 22,000

Q: You purchase a REIT for $50. It distributes $3 consisting of $1 in income, $0.50 in long-term…

A: Short-term capital gain tax and long-term capital gain tax are two types of direct tax which is…

Q: Pattison family considers the opportunity to finance the purchase of their first $500 thousand worth…

A: The amount accumulated with the investment is calculated by computing the future value of the…

Q: additional amount of funds

A: The time value of money shows the amount which is more worthful now as compared to the money will…

Q: Jose wants to set up a 10 year GRAT and does not want to have a taxable gift. He wants to transfer…

A: Present value factor = 1/(1+r)^nr= Interest raten = Number of years.Annuity payment = Contribution /…

Q: At the beginning of the year, Mr. Lanier put $50,000 cash into Investment X. At the end of the year,…

A: Capital gains tax is a direct tax that is charged on the capital gains which arise out the sale of a…

Q: The difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the…

A: IRA TYPE TAX DEDUCTION INITIALLY TAX DEDUCTION AT RETIREMENT TRADITIONAL NO YES…

Q: Laura wants to buy a delivery truck. The truck costs $53,000, and will allow her to increase her…

A: Cost of truck= $53,000Annual after tax profits = $39,000Number of years = 10 YearsDown Payment = 72%…

Q: Jeff is trying to decide whether to sell his baseball card collection. He has been offered a price…

A: Variables in the question:Profit from baseball card collection sale=$2500Current year tax…

Q: You decide to invest $27,000 in a municipal bond that earns 6.15% and is federally tax free.  Your…

A: The future value of the cash flow is the future worth of a cash flow at a certain rate of interest…

Q: Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28%…

A: (a) How much tax do you save (in $) each year by making the retirement fund contributions?The tax…

Q: Ruth has asked for help in determining whether she should receive her $32,500 bonus check in the…

A: In this problem, we are asked to determine the net revenue from bonus if she receives bonus in the…

Q: Specialty Corp is a cash basis

A: In cash basis , the tax payer gets tax deduction if the bills are paid in cash in the…

Q: If the future income tax rate at retirement (end of year 30) is 30%: 1)What is FW or Roth IRA?…

A: =Yearly investmentInterest rate[(1+interest rate)time period-1] =$1,4400.08[(1+0.08)30-1]…

Q: Simon and Marie received a statement reporting that they paid $6,000 in mortgage interest during the…

A: Qualified Mortgage Debt: To be eligible for this deduction, the mortgage must be secured by your…

Q: Hassnein recently deposited $34,000 in a savings account paying a guaranteed interest rate of 5…

A: Savings account:A savings account is a financial product offered by banks and credit unions that…

Q: 2) Suppose the income tax rate schedule is O percent on the first $10,000; 10 percent on the next…

A: 0 -10000 @ 0% 10001 - 30000 @10% 30001 -50000 @ 20% 50001 - 70000@30% 70001 & Above @40%

Q: additional amount of funds

A: Defined contribution plan refers to the workplace which is common for all the employers in which…

Q: If you live in a state that needs to collect $18 million in property taxes and has a tax rate of…

A: Property tax amount = $18,000,000 Tax rate = 2.77%

Q: If you were to save and invest $1,000 a month in after-tax dollars and earn 6% before taxes…

A: Future value of the money is the amount of deposit done and amount of compounding interest…

Q: 7. Taxpayer, age 68, just purchased an annuity contract at a cost of $100,000. Assume that the…

A: An annuity is a contract that a taxpayer enters into with an insurance company under which the…

Q: How much tax do you save (in $) each year by making the retirement fund contributions? $ (b) Using…

A: Tax savings amount is the amount which has been saved by the taxpayer by making such types of…

Q: Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28%…

A: Future value of annuity = annuity * Table factor (r, n) Tax savings = Investment in IRA * marginal…

Q: An unmarried taxpayer with no dependents expects an adjusted gross income of $87,000 in a given…

A: Step 1 As per provisions of US Federal tax, income excess over $36900 is 25% tax chargeable and…

Q: Your income is $10,000 over the cutoff for the next lowest tax bracket. Your average tax rate is…

A: Marginal tax rate represents the maximum tax rate, The marginal tax rate refers to the highest…

Q: The Wilmoths plan to purchase a house but want to determine the after-tax cost of financing its…

A: The after-tax cost of financing refers to the amount of interest paid less any income tax savings…

Q: You have just taken a job that requires you to move to a new city. In relocating, you face the…

A: The advantages of Mortgage bonds include advantages to both borrowers and lenders. Mortgage-backed…

Q: Elaine Romberg prepares her own income tax return each year. A tax preparer would charge her $60 for…

A: The total amount of money which is calculated after discounting the future payments are known as…

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.