Purchase Solution

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

Not what you're looking for?

Ask Custom Question

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?

Purchase this Solution
Solution Summary

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

Solution Preview

ANSWERS

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 ...

Purchase this Solution
Free BrainMass Quizzes
Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

View More Free Quizzes
Related BrainMass Solutions

  • This posting explains mortgages due from a liquidation.

    When a company is liquidated and the fixed assets are liquidated, the full amount outstanding is paid from the proceeds of the sale.

  • Accounting: Ratio, depreciation, Cash flow statement etc.

    Salvage amount: The amount that an asset would be worth after its useful life. 2. Useful life: The number of years that an item will last. 3.

  • Consolidation, redemption, complete liquidation, capital loss

    What are the tax consequences of the redemption to Tanya's estate and to Finch Corporation? 3. After a plan of complete liquidation has been adopted, Purple Corporation sells its only asset, land, to Rex (an unrelated party) for $800,000.

  • This post addresses multiple partnership and tax scenarios.

    Compare the distribution of property rules for an S corporation with the corresponding partnership rules. 3. Your client has operated a sole proprietorship for several years, and is now interested in raising capital for expansion.

  • After tax-rates of return

    This solution is comprised of a detailed explanation to compare the after-tax rates of return for a corporate investor from the two investments.

  • Liquidation - Tax Accounting

    Complete liquidation - open transaction ABC,Inc. adopts a plan of complete liquidation on July 3, 10*1 and pursuant to the plan makes the following distributions to Anne Able, its sole shareholders, who has a basis of $26,000 for her stock: July

  • Personal Finances: After-Tax Yields

    After tax return= Pretax return*(1-tax rate) b) Compare the after tax returns on each investments and Selecting the investment on risk -return appetite Let us calculate the After tax returns on each of them: A.

  • Residual Claim to Income

    The earnings/income available to shareholders equal profit after tax minus preference dividend; the preference after tax is equal to operating profits less taxes (Khan, 2007).

  • basic characteristics of preferred shares

    What is the effect on net profits after tax for a company when it issues bonds or debentures? Debt financing creates a liability for a company. It must repay the debt and pay interest while the debt is outstanding.

View More Related Solutions