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23 September, 08:19

Diana sold mutual fund shares she had owned 4 years so that she could use the proceeds to travel across Europe with her son. Diana is in the 35% marginal tax bracket and her capital gains from this sale were $30,000. How much tax would Diana owe on those gains? a. $10,500 b. $8,400 c. $6,000 d. $4,500 e. $1,500.

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Answers (2)
  1. 23 September, 09:26
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    c. $6,000

    Explanation:

    Diana sold mutual fund shares she had owned 4 years so that she could use the proceeds to travel across Europe with her son.

    Diana is in the 35% marginal tax bracket and her capital gains from this sale were $30,000.

    The amount of tax that Diana would pay on those gains is $6,000

    When it comes to capital gains from mutual funds, the treatment is different because there are rates for short-term and long-term.

    Short term or held for one year is 15% while long term is 20%.

    Diana held her mutual funds for 4 years hence will be taxed at 20%

    205 of $30,000 = $6000
  2. 23 September, 11:25
    0
    Answer: D. $4,500

    Explanation:

    According to the question, Diane had owned the shares for 4 years meaning it's in the long term bracket (mutual funds held for more than one year).

    Hence, investment income received on long term shares of a mutual fund are called capital gains.

    Also Diane belongs to the 35% marginal tax bracket, Hence, Diane's capital gains of $30,000 will be taxed at 15%. Because taxes on capital gains are dependent on the marginal tax bracket of the individual. Individuals in the 37% tax bracket, pays 20% tax on their capital gains.

    Therefore, Diane tax will be:

    15% of $30,000

    0.15 * $30,000 = $4,500
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