Question

You purchased 100 shares of MegaCorp for $17 per share four months ago. The brokerage fee was 4% of the total dollar amount of the purchase. Today you sold the shares for $23.50 per share. Brokerage fees were 4% of the total sale value. If you are in the .28 marginal tax bracket, how much tax do you owe (rounded to the nearest dollar) on the capital gain

Answer 1

Answer: $136.64 Owed on Capital gain.

Step-by-step explanation:

Base on the information given in the question, the tax owed on the capital gain will be calculated thus:

Total purchase cost = 100 × $17 + [(100 × $17) × 4%]

= $1700 + ($1700 × 0.04)

= $1700 + $68

= $1,768

We than calculate the net sale consideration which will be:

= 100 × $23.50 - [(100 × $23.50) × 4%]

= $2350 - ($2350 × 0.04)

= $2350 - $94

= $2,256

Then, the short term capital gain will be:

= $2,256 - $1,768

= $488

The tax on short term capital gain will be:

= $488 × 28%

= $488 × 0.28

= $136.64