Question

Ronnie owns 600 shares of a stock mutual fund. This year he received dividend distributions of 60 stock mutual fund shares ($61 per​ share) and​ long-term capital gain distributions of 38 stock mutual fund shares​ (also $61 per​ share). What are the tax consequences of​ Ronnie's stock mutual fund ownership if he is in a 28​% marginal tax​ bracket?

Answer 1

So total tax that is levied on the total gain from MF is $896.7

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When you buy some stock or mutual fund and you hold it for more than a year, then any gain you receive on the investment is called long term capital gain, tax is levied on this gain.

A person who is in 28% tax bracket, will be levied 15 % tax on the gain

So tax = (Long term capital gain + Dividend) * .15

          = [(60 + 38) * 61] * 15

           = 896.7

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Hope this answer your query.

Feel free to comment if you need further assistance. J