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.)

Question

Joe Kent

Business

20 March, 03:23

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.)

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Amir · Answer 1

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.