Tax rates above 25% a)Have no impact on personal finance decisions b)Encourage t

Question

Tax rates above 25%

a)Have no impact on personal finance decisions

b)Encourage the rich to invest in municipal bonds

c)Are not bothersome when they are marginal rates rather than average rates

d)Have historically been imposed only on capital gains.

e)Have historically been imposed only on ordinary income.

You and your spouse bought a house for $100,000 in 2000 and sold it for $500,000 this year. It was your primary residence. How much will you owe in capital-gains taxes?

$100,000 (.25 times $400,000 profit)

$ 60,000 (.15 times $400,000 profit)

$ 15,000 (.15 times $100,000 profit)

$ 75,000 (.15 times $500,000 profit)

$0

Transfer of assets from parents to their adult children.

a)Should occur within five years of the parents’ admission to nursing home.

b)Can easily be done on major assets with Transfer on Death titling.

c)Should be in cash as much as possible.

d)Do not belong in a financial estate plan

Explanation / Answer

1. Tax Rates above 25% have been historically imposed only on capital gains

2. Capital Gains owed: $1,00,000 {(500000-400000)*0.25}

3.Transfer of assets from parents to their adult children can easily be done on major assets with transfer on death titling

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