In 2015 the value of Joe\'s stock portfolio decreased significantly. He sold sev
ID: 2530818 • Letter: I
Question
In 2015 the value of Joe's stock portfolio decreased significantly. He sold several investments which generated a long-term capital gain of $25,000 and a short-term capital loss of $30,000.
What is his net tax cost or net tax savings for 2015 from these transactions if his marginal tax rate is 28%?
Net tax imposed of $2,482
Net tax imposed of $1,460
Net tax savings of $1,400
Net tax savings of $840
Net tax imposed of $2,482
Net tax imposed of $1,460
Net tax savings of $1,400
Net tax savings of $840
Explanation / Answer
In 2015, Joe would record a net tax savings of $1,400.
In 2015, Joe generated a long term capital gain of $25,000 on which he would be paying an long term capital gain tax of $7000 ($25,000*0.28)
Further, Joe also hold some short term asset on which he booked short term capital loss of $30,000, from which he saved his tax liability of $8400.
Hence the net tax saving would be $1,400
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