Common stock is considered to be one of the most popular investment vehicles for long$-$term wealth building. Investors earn income from common stock in the form of dividends and$/$or capital gains. As an investor it is important to understand the implications of investing in stocks from a tax perspective.

Two years ago, Kevin purchased $100$ shares of a particular company$$s stock at a price of $$111\mathrm{.}17$ per share. Last year, Kevin received an annual dividend of $$1\mathrm{.}20$ per share, and at the end of the year, a share of stock was trading at $$112\mathrm{.}22$ per share. This year, Kevin received an annual dividend of $$1\mathrm{.}32$ per share and afterward sold all $100$ shares at a price of $$122\mathrm{.}43$ per share.

In the first column of the following table, enter the total annual dividends Kevin received each year, as well as the total capital gains at the end of each year.

Suppose Kevin is in the $28\%$ tax bracket. Compute the taxes Kevin pays each year on dividends and capital gains from this investment by completing the second column in the table.

Calculating Taxes Owed on Kevin$$s Investment

Amount

Taxes Owed

Year $1$ Dividends:

$

$

Capital Gains:

$

$

Year $2$ Dividends:

$

$

Capital Gains: