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    Compare the liquidation of 3 investments for greatest after tax amount.

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    Please help with the following problem.

    Consider three investors who need to partially liquidate investments to raise cash. In this case all investments have been held for 3 or more years. Investor A waited for a $1,500 qualified dividend distribution from her mutual fund, and investor B received $1,500 in interest income from a CD. However, because Investor C could not wait for a distribution, he decided to sell $1,500 of appreciated stock shares. Assuming no commissions, sales charges, or state income tax, and a 25-percent federal marginal tax bracket, which investment will provide the greatest after tax amount? Would your answer change if all investors were in the 15 percent tax bracket?

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    Solution Preview


    25% tax bracket
    Investor A
    Qualified tax rate is 15% for the 25% income bracket
    After tax = $1,500*(1-15%)=$1,275

    Investor B
    Interest income is part of ordinary ...

    Solution Summary

    The liquidation of three investments for greatest after tax amounts are determined. Step by step calculations are provided.