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Helen holds 1,200 shares of Fizbo Incorporated stock that she purchased 11 months ago. The stock has done very well and has appreciated $45/share since
Helen holds 1,200 shares of Fizbo Incorporated stock that she purchased 11 months ago. The stock has done very well and has appreciated $45/share since Helen bought the stock. When sold, the stock will be taxed at capital gains rates (the long-term rate is 15 percent and the short-term rate is the taxpayer's marginal tax rate). Ignore the time value of money. a. If Helen's marginal tax rate is 35 percent, how much would she save by holding the stock an additional month before selling? Tax savings b. What might prevent Helen from waiting to sell? Helen bears The stock price could In addition, Helen may be selling the stock if she holds the stock for an additional month. substantially if there is market volatility or if the company encounters financial difficulties. for which she may be unwilling to wait
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