Purchase Solution

Tax Effect of the Sales of Blocks of Stock

Not what you're looking for?

Ask Custom Question

Q:
Sly and Jennifer are in the 33% tax bracket for ordinary income and the 15% bracket for capital gains. They have owned several blocks of stock for many years. They are considering the sale of two blocks of stock. The sale of one would produce a gain of $12,000 while the sale of the other would produce a loss of $18,000. For purposes of this problem, ignore personal exemptions, itemized deductions, and other phase-outs. They have no other gains and losses this year.
a. How much tax will they save if they sell the block of stock that produces a loss?
b. How much additional tax will they pay if they sell the block of stock that produces a gain?
c. What will be the impact on their taxes if they sell both blocks of stock?

Purchase this Solution
Solution Summary

Citing authoritative references, this solution illustrates how to compute the tax effect of selling stocks at a gain or a loss.

Solution Preview

a. How much tax will they save if they sell the block of stock that produces a loss?

IRC section 1211(b) states that "In the case of a taxpayer other than a corporation, losses from sales or exchanges of capital assets shall be allowed only to the extent of the gains from such sales or exchanges, plus (if such losses exceed such gains) the lower of ... ...

Purchase this Solution
Free BrainMass Quizzes
Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Introduction to Finance

This quiz test introductory finance topics.

View More Free Quizzes
Related BrainMass Solutions

  • This posting addresses tax consequences of Sly & Jennifer.

    394380 block of stock Sly and Jennifer are in the 33% tax bracket for ordinary income and the 15% bracket for capital gains. They have owned several blocks of stock for many years. They are considering the sale of two blocks of stock.

  • Cost of Debt, Cost of Capital, Leverage & Dividend Reinvestment

    a. decreases the return b. has no effect on the return c. increases the return d. has an undetermined effect 1.28 A corporation has $5,000,000 of 8 percent preferred stock outstanding and a 40 percent tax rate.

  • Earnings per share, Leverage

    The firm is in the 40% tax bracket and has 5,000 shares of common stock outstanding. a. Calculate the firm's levels of earnings per share associated with the expected sales of 20,000 units and with sales of 30,000 units. b.

  • Explain types of stock options and their effect on a company

    352309 Explain the types of stock options and their effect on a company. Explain the types of stock options and their effect on a company. There are several types of options.

  • Malone Corporation's Capital Structure

    amount of income taxes applicable to ordinary income was $48,600, excluding the tax effect of the earthquake loss which amounted to $18,000 and the tax effect of the change of accounting principle which was $12,000.

  • Netting Gains and Losses

    Determine Trisha's increase in tax liability as a result of the three sales. All assets are stock held for investment. Ignore the effect of increasing AGI on deductions and phase-out amounts.

  • Business Help: Income statement

    amount of income taxes applicable to ordinary income was $67,200, excluding the tax effect of the earthquake loss which amounted to $18,000 and the tax effect of the change of accounting principle which was $12,000.

  • Income/Loss to Shareholders

    The tax benefit from exercise of employee stock options is $12 million.

  • Proceeds from an issue of debt securities having stock

    additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings. 8) "Gains" on sales of treasury stock (using the cost method) should be credited to

View More Related Solutions