pter 3 anclal Planning Exercise 3 my Phillips is single and in the 33% tax brack

Question

pter 3 anclal Planning Exercise 3 my Phillips is single and in the 33% tax bracket calculate the tax associated with each of the following transactions use the BS regulations for capital ga s n effet In KHIBIT 3.2 Capital Gains Tax Categories as of 2010 ptal gains tax rates are as low as O percent for low-income or is percent for higher-income levels, so long as the holding perod is more than 12 montha. period is more than 12 months. Holding perlod Tax Brackets (2011) Tax on Capital gains Same as ordinary income Less than 12 months All ( 10%, 15%, 2S%, 28%, 33% and 35%) 10%,15% 25%, 28%, 33%, 35% Over 12 months 0% 15% reat each of the following cases as independent of the others She sold stock for $1,995 that she purchased for $1,500 11 months earlier. Round the answer to the nearest cent. Tax savings should be preceded by a sign. b. She sold bonds for $2,700 that she purchased for $2,000 3 years earlier. Tax savings she purchased for $1,000 23 months earler. Assume this to be the only Stock in Amy's portfolio. Round the answer to the nearest cent. Tax savin should be preceded by a "- sign. Check My Work

Explanation / Answer

a) capital gains = 1995-1500 = 495

since holding period is less than 12 months, so tax rate is same as that applicable on normal income, which is 33%

so, tax = 33% * 495 = 163.35

b)

capital gains = 2700-2000 = 700

since holding period is more than 12 months, and tax bracket is 33%, so applicable tax rate is 15%

so, tax = 15% * 700 = 105

c)

capital gains = 860-1000 = -140

since holding period is more than 12 months, and tax bracket is 33%, so applicable tax rate is 15%

so, tax = 15% * -140 = -21

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