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 32 percent marginal tax bracket for individuals.
A)$5,100
B)$4,500
C)$3,000
D)$2,250

Question

Quizplus · Accepted Answer

If Charles holds onto his stock until he can benefit from the long-term capital gains tax rate of 15%, he would save the difference between the 32% tax he would pay on a short-term gain and the 15% long-term rate. This difference is 17% (32% - 15%). On a $30,000 gain, a 17% savings amounts to $5,100 ($30,000 * 0.17).

How Much Tax Can Charles Save If He Holds Stock