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Daniel is considering selling two stocks that have not fared well over recent years. A friend recently informed Daniel that one of his stocks has a special designation, which allows him to treat a loss up to $58,000 on this stock as an ordinary loss rather than the typical capital loss. Daniel figures that he has a loss of $69,600 on each stock. If Daniel’s marginal tax rate is 35 percent and he has $139,200 of other capital gains (taxed at 15 percent), what is the tax savings from the special tax treatment?

Respuesta :

Answer:

$11,600

Explanation:

The computation of tax savings from the special tax treatment is shown below:-

Particulars           Special stock              Normal stock

Loss                     -$69,600                    -$69,600

ordinary loss        $20,300                       -

                          ($58,000 × 35%)

Capital loss         $1,740                                      $10,440

                ($69,600 - $58,000) × 15% ($69,600 × 15%)

Total savings $22,040                                  $10,440

Now,

The tax savings from the special tax treatment = $22,040 - $10,440

= $11,600

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