Melinda sold mutual fund shares, which she had owned for 5 years, so that she could use the proceeds to travel with her sister. Melinda is in the 32% ordinary tax bracket, and her capital gain from the sale was $40,000. Melinda's tax liability on the gain is:

Question

Quizplus · Accepted Answer

Since Melinda held the mutual fund shares for more than one year, her capital gain is considered a long-term capital gain. Long-term capital gains are taxed at a lower rate than ordinary income. For someone in the 32% tax bracket, the long-term capital gains tax rate is typically 15%. Therefore, her tax liability on the $40,000 gain would be $40,000 x 15% = $6,000.

Melinda Sold Mutual Fund Shares, Which She Had Owned for 5