Question

Shaun bought 390 shares of Dental Equipment Inc. several years ago for $11,300. Currently the stock is worth $9,400. Shaun’s marginal tax rate this year is 24 percent, and he has no other capital gains or losses. Shaun expects to have a marginal rate of 32 percent next year, but he also expects to have a long-term capital gain of $11,300. To minimize taxes, should Shaun sell the stock on December 31 of this year or January 1 of next year (ignore the time value of money)? (Use the dividends and capital gains tax rates and tax rate schedules.)

Answer 1

Answer:

January 1 of next year

Explanation:

Selling now will make the entire gain taxable to his incoe tax bracket

While the long-term captial gain have a different rate.

As 2019 the current brackets for long-term capital gaisn are:

0% $         0 to $   39,375

15% $39,376 to $434,550

20% $434,551 or more

As Shaun gain is less than 39,375 it will be subject to no taxation thus, paying no taxes.