Question
Use the IRS Pub. 550: Investment Income and Expenses website as needed for the following questions. Two separate taxpayers, each age 70, earn the following
| Use the IRS Pub. 550: Investment Income and Expenses website as needed for the following questions. | |||||
| Two separate taxpayers, each age 70, earn the following income from investments in their non-retirement account. Akira is in the highest tax bracket, and Julio is in the lowest tax bracket. What are the differences in taxes they pay on each source of income? | |||||
| Akira | Julio | ||||
| Income | Amount | Tax | Net Income | Tax | Net Income |
| Bank Interest | $ 450 | ||||
| Qualified Dividends | $ 1,200 | ||||
| Ordinary Dividends | $ 1,200 | ||||
| Long-term Capital Gains | $ 5,000 | ||||
| Short-term Capital Gains | $ 6,000 | ||||
| Series I Savings Bond Cashed in for Higher Education | $ 10,000 | ||||
| Municipal Bond Interest | $ 900 | ||||
| TOTAL | $ 24,750 | ||||
How can Akira and Julio change their portfolio to reduce taxes? Show your calculations to present the differences in taxes and strategies?
Would it be more tax efficient for Akira and Julio to withdraw $10,000 from their 401k or their taxable brokerage account? Why?
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
