Question

1. You are in the 28 percent income tax bracket and pay long-term capital gains taxes of 15 percent. What are the taxes owed or saved in the current year for each of the following sets of transactions?

a.) You buy 100 shares of ZYX for $10 and after seven months sell it on December 31, 201X, for $23. You buy 100 shares of WER for $10 and after 15 months sell it on December 31 201X, for $7. You buy 100 shares of DFG for $10 and after nine months, on December 31, 201X, it is selling for $15.

b.) You buy 100 shares of ZYX for $60 and after seven months sell it on December 31, 201Y, for $37. You buy 100 shares of WER for $60 and after 15 months sell it on December 31, 201Y, for $67. You buy 100 shares of DFG for $60 and after nine months sell it on December 31, 201Y, for $76.

c.) On January 2, 201X, you buy 100 shares of ZYX for $40 and sell it for $31 after 22 months. On January 2, 201X, you buy 100 shares of WER for $40 and sell it for $27 after 15 months. On January 2, 201X, you buy 100 shares of DFG for $40 and sell it for $16 after 18 months.

d.) On January 2, 201X, you buy 100 shares of ZYX for $60. On October 2, 201X, you sell 100 shares of ZYX for $40. On October 10, 201X, you purchase 100 shares of ZYX for $25.

Answer 1

Long-term capital gains are derived from investments held for more than one year.

a.)

	Number of Shares	Bought at	Sold at	Number of Months Held	Long-term / Short-term	Gain/Loss	Tax Rate	Tax Owed / (Saved)
ZYX	100	$10	$23	7	Short-term	$             1,300	28	$                364
WER	100	$10	$7	15	Long-term	$              (300)	15	$                (45)
DFG	100	$10	$15	9	Short-term	$                500	28	$                140
						Net Tax Owed / (Saved)		$                459

b.)

	Number of Shares	Bought at	Sold at	Number of Months Held	Long-term / Short-term	Gain/Loss	Tax Rate	Tax Owed / (Saved)
ZYX	100	$60	$37	7	Short-term	$          (2,300)	28	$              (644)
WER	100	$60	$67	15	Long-term	$                700	15	$                105
DFG	100	$60	$76	9	Short-term	$             1,600	28	$                448
						Net Tax Owed / (Saved)		$                (91)

c.)

	Number of Shares	Bought at	Sold at	Number of Months Held	Long-term / Short-term	Gain/Loss	Tax Rate	Tax Owed / (Saved)
ZYX	100	$40	$31	22	No taxes are owed or Saved in the current year as the investment are not sold in current year.
WER	100	$40	$27	15	No taxes are owed or Saved in the current year as the investment are not sold in current year.
DFG	100	$40	$16	18	No taxes are owed or Saved in the current year as the investment are not sold in current year.

d.)

	Number of Shares	Bought at	Sold at	Number of Months Held	Long-term / Short-term	Gain/Loss	Tax Rate	Tax Owed / (Saved)
ZYX	100	$60	$40	9	Short-term	$          (2,000)	28	$              (560)
ZYX	100	$25	No taxes are owed or Saved in the current year as the investment are not sold in current year.
							Net Tax Owed / (Saved)	$              (560)