Tex Payor bought 1,500 shares of the Bonds4U Mutual Fund, a no load fund, on June 12^th for $28 a share and sold the shares the following year on June 11^th for $40 a share. This will result in which of the following tax consequences for Tex?

Question

Quizplus · Accepted Answer

If Tex bought 1,500 shares of Bonds4U at $28 on June 12^th and sold the shares on June 11^th the following year for $40 a share, Tex will have to pay tax on $18,000, taxed as ordinary income at his marginal tax rate. He is taxed on his gain of $40 - $28 = $12 a share times 1,500 shares = $18,000. For tax purposes, his holding period begins the day after his purchase, or June 13^th in this example, and ends the day on which sells the shares, or June 11^th of the following year, in this case. Since this is less than 12 months, the gain on the sale is considered to be a short-term capital gain, which is taxed as ordinary income.

Tex Payor Bought 1,500 Shares of the Bonds4U Mutual Fund