Question

Two years ago, Albert purchased 100 shares of a particular company’s stock at a price of...

Two years ago, Albert purchased 100 shares of a particular company’s stock at a price of $105.25 per share. Last year, Albert received an annual dividend of $1.45 per share, and at the end of the year, a share of stock was trading at $110.84 per share. This year, Albert received an annual dividend of $1.60 per share and afterward sold all 100 shares at a price of $121.05 per share.

In the first column of the following table, enter the total annual dividends Albert received each year, as well as the total capital gains at the end of each year.

Suppose Albert is in the 28% tax bracket. Compute the taxes Albert pays each year on dividends and capital gains from this investment by completing the second column in the table.

Calculating Taxes Owed on Albert’s Investment

Amount

Taxes Owed

Year 1 Dividends:
Capital Gains:
Year 2 Dividends:
Capital Gains:

The total amount of investment income (pre taxes) that Albert earned on this investment over the course of 2 years is ___

.

The total amount that Albert pays in taxes on income from this investment income is ___

Homework Answers

Answer #1

Column 1'

Computations are given below-

Year 1

Dividends recieved =100*1.45=145

Capital gain at the end of year-100*(110.84-105.25)=559

Year 2

Dividends recieved =100*1.60=160

Capital gain at the end of year-100*(121.05-110.84)=1021

Column 2

Total income on investment Albert Earned in 2 years (Pre-tax)

Year 1 - Dividend 145

Capital Gain 559

Year 2 - Dividend 160

Capital Gain 1021

Gross Total    1885

Less- Tax @ 28% 527.80

Net Income on Investment 1357.20

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