In 2013, Alva received dividends on her stocks as follows:
Amur Corporation (a French corporation whose stock is traded on an established U.S. securities market) .................................................................. $60,000
Blaze, Inc., a Delaware corporation .................................. 40,000
Grape, Inc., a Virginia corporation ................................... 22,000
a. Alva purchased the Grape stock three years ago, and she purchased the Amur stock two years ago. She purchased the Blaze stock 18 days before it went ex-dividend and sold it 20 days later at a $5,000 loss. Alva had no other capital gains and losses for the year. She is in the 35% marginal tax bracket. Compute Alva's tax on her dividend income for 2013.
b. Alva's daughter, who is 25 and not Alva's dependent, had taxable income of $6,000, which included $1,000 of dividends on Grape, Inc. stock. The daughter had purchased the stock two years ago. Compute the daughter's tax liability on the dividends.
c. Alva can earn 5% before-tax interest on a corporate bond or a 4% dividend on a preferred stock. Assuming that the appreciation in value is the same, which investment produces the greater after-tax income?
d. The same as part (c), except that Alva's daughter is to make the investment?