12. Yolanda is your client. With her current level of taxable income, sheis paying tax at a 25% marginal rate. She received $2,000 in qualifieddividends this year. What rate of tax do you expect that Yolanda willpay on her dividends. ad. The dividends are considered ordinary income, so they will be taxed atYolanda's marginal rate of 25%. ae. Qualiﬁed dividends are tax-deferred income and will be taxed in a futureyear when the underlying investment is sold. ag. QuaIified dividends are tax-exempt income, so the dividends will not betaxed now or in the future.

Question

Cooper Prince

Business

16 February, 07:52

12. Yolanda is your client. With her current level of taxable income, sheis paying tax at a 25% marginal rate. She received $2,000 in qualifieddividends this year. What rate of tax do you expect that Yolanda willpay on her dividends. ad. The dividends are considered ordinary income, so they will be taxed atYolanda's marginal rate of 25%. ae. Qualiﬁed dividends are tax-deferred income and will be taxed in a futureyear when the underlying investment is sold. ag. QuaIified dividends are tax-exempt income, so the dividends will not betaxed now or in the future.

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Koen Odonnell · Answer 1

Qualified dividends are not considered ordinary income, they are considered capital gains. Ordinary dividends are considered ordinary income.

Since qualified dividends are considered capital gains, they should be taxed at the capital gains rate: 0%, 15% or 20%.

Currently there is no 25% tax bracket, there is a 22% and a 24% tax bracket, but any of them qualifies for the 15% capital gains tax rate.

So Yolanda's qualified dividends will be taxed at 15% rate = $2,000 x 15% = $300 tax liability.