Johnson & Bradley, Inc. invested $10,000 in 200 shares of ABC stock 18 months ago, and...

Johnson & Bradley, Inc. invested $10,000 in 200 shares of ABC stock 18 months ago, and just sold all of them for $12,500. If it is subject to a tax rate of 35%, what is the tax on this investment income?

Expert Solution

Capital gains tax is levied on the amount of capital gain, in the year of transaction which results in the gain, irrespective of the period of holding.

Capital gain= Sale price- Investment

Given,

Sale price= $12,500

Investment= $10,000

Tax rate= 35%

Therefore, amount of tax= ($12,500-$10,000)*35%

=$2,500*35% = $875

jeff jeffy answered 2 years ago

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