Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Jana just found out that she is going to receive an end-of-year bonus of $26,200. She is in the 35 percent marginal tax bracket. Calculate

image text in transcribed
image text in transcribed
image text in transcribed
Jana just found out that she is going to receive an end-of-year bonus of $26,200. She is in the 35 percent marginal tax bracket. Calculate her income tax on this bonus. Now assume that instead of receiving a bonus, Jana receives the $26,200 as a long-term capital gain. What will be her tax? Which form of compensation offers Jana the best after-tax return? Would your calculation be different if the gain was short-term rather than long-term? Her income tax on this bonus is $ (Round to the nearest dollar.) Now assume that instead of receiving a bonus, Jana receives the $26,200 as a long-term capital gain. What will be her tax? Which form of compensation offers Jana the best after-tax return? Would your calculation be different if the gain was short-term rather than long-term? (Select the best answer below.) O A. Jana will pay $3,930 ($26,200 x 15%) in long-term capital gains taxes. Due to the reduced tax rate, the long-term capital gain offers Jana the best after-tax return. Because short-term capital gains are taxed as ordinary income, she will not receive any tax benefit if she receives the bonus as a short-term capital gain. B. Jana will pay $3,930 ($26,200 x 15%) in long-term capital gains taxes. Due to the reduced tax rate, the short-term capital gain offers Jana the best after-tax return. Because long-term capital gains are taxed as ordinary income, she will not receive any tax benefit if she receives the bonus as a long-term capital gain

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

Urban Public Finance

Authors: D. Wildasin

1st Edition

0415851882, 978-0415851886

More Books

Students also viewed these Finance questions