Question

oel purchased 100 shares of stock for ​$31 per share. During the​ year, he received dividend checks amounting to ​$202. Joel recently sold the stock for ​$58 per share. Joel is in a 35​% tax bracket. He would pay ​$945 in taxes if he held the stock for less than a year. How much would Joel save in taxes if he held the stock for more than a​ year, assuming he sold it for the same​ amount?

Answer 1

Joel would save tax of $540 if the stock was held for more than a year

Step-by-step explanation:

If the stock is held for more than one year and then sold then the gain on sale would be long term capital gain

The long term capital gain would be charged at preferential rate of 15%

Calculate long term capital gain tax on sale

Long term capital gain (Sale price - Purchase price)*No of shares

Long term capital gain (58-31)*100

Long term capital gain $2700

Tax on long term capital gain 2700*15%

Tax on long term capital gain $405

Savings in tax 945 - 405

Savings in tax $540

Thus, Joel would save tax of $540 if the stock was held for more than a year