Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Five years ago, Jamal purchased 1 0 , 0 0 0 shares of stock at $ 1 0 per share in a pharmaceutical company. Today,

Five years ago, Jamal purchased 10,000 shares of stock at $10 per share in a
pharmaceutical company. Today, the stock is worth $200,000 and is paying a
dividend of $8,000 per year. Jamal expects that the stock will continue to appreciate
at a rate of 12% per year, including the dividend. He wants to establish a college
education fund for his two daughters, ages 19 and 14. Which of the following
statements is/are true?
If Jamal gives 2,500 shares of stock to his 19-year-old daughter, all dividends
from the 2,500 shares in excess of her standard deduction will be taxed in her
income tax bracket.
If Jamal gives 2,500 shares of stock to his 14-year-old daughter and she sells
it for a $3,000 gain, she will pay no tax at her marginal rate.
Two years from now, if Jamal's older daughter sells her 2,500 shares of stock
at a gain of $3,500; she will have only $1,150 of income taxed at her rate.
All dividend income earned by his 14-year-old daughter in excess of $2,300,
will be taxed at Jamal's income tax rate.
4 only.
1 and 4.
1,2, and 3.
2 and 4.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Jeff Madura

3rd Edition

0321357973, 978-0321357977

More Books

Students also viewed these Finance questions