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QUESTION 8 For example, suppose a dividend of $1 per share is taxed at ordinary rates. Investors in the 28 percent tax bracket who own 100 shares of the security pay $100 x 28 - $28 in taxes. Selling shareholders would pay far lower taxes if $100 worth of stock were repurchased. This is because taxes are paid only on the profit from a sale. The gain on a sale would be only $40 if shares sold at $100 were originally purchased at $60. The capital gains tax would be ? O1.$11.20 O2.$38.20 O 3. $28.00 O 4. None of these

QUESTION 8 For example, suppose a dividend of $1 per share is taxed at ordinary rates. Investors in the 28 percent tax bracket who own 100 shares of the security pay $100 x 28 - $28 in taxes. Selling shareholders would pay far lower taxes if $100 worth of stock were repurchased. This is because taxes are paid only on the profit from a sale. The gain on a sale would be only $40 if shares sold at $100 were originally purchased at $60. The capital gains tax would be ? O1.$11.20 O2.$38.20 O 3. $28.00 O 4. None of these

FINANCIAL ACCOUNTING
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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QUESTION 8 For example, suppose a dividend of $1 per share is taxed at ordinary rates. Investors in the 28 percent tax bracket who own 100 shares of the security pay $100 x 28 = $28 in taxes. Selling shareholders would pay far lower taxes if $100 worth of stock were repurchased. This is because taxes are paid only on the profit from a sale. The gain on a sale would be only $40 if shares sold at $100 were originally purchased at $60. The capital gains tax would be ? 01.$11.20 O2. $38.20 O 3. $28.00 O 4. None of these
Transcribed Image Text:QUESTION 8 For example, suppose a dividend of $1 per share is taxed at ordinary rates. Investors in the 28 percent tax bracket who own 100 shares of the security pay $100 x 28 = $28 in taxes. Selling shareholders would pay far lower taxes if $100 worth of stock were repurchased. This is because taxes are paid only on the profit from a sale. The gain on a sale would be only $40 if shares sold at $100 were originally purchased at $60. The capital gains tax would be ? 01.$11.20 O2. $38.20 O 3. $28.00 O 4. None of these
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