Question

Kendra’s income puts her in the top tax bracket (35%) last year. During the same year, she earned $760 in dividends and $490 in coupons on a corporate bond. Three years ago, she purchased a common stock for $835. She sold the same stock last year for $1180. What is the total Kendra will pay in taxes on last year’s investments?

Answer 1

Dividend Income Tax-Stock dividends-If in bottom two tax brackets, not taxed If in top four brackets, taxed at 15%

Interest Income Tax-Bond coupons-Taxed as ordinary income: 10% to 35% Exception: Municipal bond coupons are not taxed.

Capital Gains Tax-Gain from sale of-stocks or bonds-Held for one year or less (short-term): taxed as ordinary income Held for more than one year (long-term): taxed as dividend income

Answer 2

$337.25

$223.25

$406.25

$165.75