How much tax can Charles save if he holds stock on which he has a $30,000 short-term gain until he can use the applicable 15 percent long-term capital gains tax rate? He is in the 25 marginal tax rate for individuals.
A)$6,000
B)$4,500
C)$3,000
D)$2,250

Question

Quizplus · Accepted Answer

The short-term gain tax rate for Charles is 25% because he is in the 25% marginal tax bracket for individuals. If Charles holds the stock until he qualifies for the lower long-term capital gains tax rate, he will pay only 15% tax on the gain. Therefore, the tax savings will be:
$30,000 x (25% - 15%) = $3,000
So the correct answer is B, $4,500.

How Much Tax Can Charles Save If He Holds Stock