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On January​ 1, 2013, an investor bought 300 shares of​ Gottahavit, Inc., for $69 per share....

On January​ 1, 2013, an investor bought 300 shares of​ Gottahavit, Inc., for $69 per share. On January​ 3, 2014, the investor sold the stock for ​$74 per share. The stock paid a quarterly dividend of $0.24 per share. How much​(in $) did the investor earn on this investment​ and, assuming the investor is in the 33​% tax​ bracket, how much will she pay in income taxes on this​ transaction? Assume a preferential tax rate of​ 15% on dividends and capital gains.

A)The amount​ (before taxes) the investor earned on this investment is ​$______ ​(Round to the nearest​ dollar.)

B)Assuming a preferential tax rate of​ 15%, the amount she will pay in income taxes on this transaction is ​$_____.​(Round to the nearest​ cent.)

Solutions

Expert Solution

Amount Earned Before Taxes = Dividends+Capital Gain = [Quarterly Dividend*4*Number of Shares]+[(Selling Price-Purchase Price)*Number of Shares]

= [(0.24*4)*300]+[(74-69)*300]

= 288+1500

= $1788

Income Tax Payable = (Dividend+Capital Gains)*15% = Amount Earned Before Taxes*15% = 1788*15% = $268.2

jeff jeffy answered 2 years ago
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