Question
Ms. Prince wants to create a scholarship in honor of her parents at the law school from which she received her degree. She could endow
Ms. Prince wants to create a scholarship in honor of her parents at the law school from which she received her degree. She could endow the scholarship with $700,000 cash or with $700,000 worth of marketable securities with a cost basis of $420,000. Assume the taxable year is 2022.
Required:
If her AGI is $3.8 million, compute the after-tax cost of the two endowment options. Use Individual Tax Rate Schedules and Tax rates for capital gains and qualified dividends.
Note: Enter your answers in dollars not in millions of dollars.
After-tax cost a)cash b)securities
Hey Chegg expert! So, my professor gave me these tables to figure out some numbers, and he came up with $441,000 for the cash part and $322,500 for the securities part. Can you help me understand how he got the SECURITY PART? I'm a bit lost here. Thanks a bunch!
You now look at the following table:
Tax rates for capital gains and qualified dividends
Rate | Married Filing Jointly | Married Filing Separately | Single | Head of Household |
---|---|---|---|---|
0%* | $0 $83,350 | $0 $41,675 | $0 $41,675 | $0 $55,800 |
15%** | $83,351 $517,200 | $41,676 $258,600 | $41,676 $459,750 | $55,801 $488,500 |
20% | $517,201+ | $258,601+ | $459,751+ | $488,501+ |
* The highest income amount in this range for each filing status is referred to as maximum zero rate amount.
** The highest income amount in this range for each filing status is referred to as maximum 15-percent amount
You also look at these tables:
Individual Tax Rate Schedules
Married Filing Jointly and Surviving Spouse
If taxable income is | The tax is |
---|---|
Not over $20,550 | 10% of taxable income |
Over $20,550 but not over $83,550 | $2,055.00 + 12% of excess over $20,550 |
Over $83,550 but not over $178,150 | $9,615.00 + 22% of excess over $83,550 |
Over $178,150 but not over $340,100 | $30,427.00 + 24% of excess over $178,150 |
Over $340,100 but not over $431,900 | $69,295.00 + 32% of excess over $340,100 |
Over $431,900 but not over $647,850 | $98,671.00 + 35% of excess over $431,900 |
Over $647,850 | $174,253.50 + 37% of excess over $647,850 |
Married Filing Separately
If taxable income is | The tax is |
---|---|
Not over $10,275 | 10% of taxable income |
Over $10,275 but not over $41,775 | $1,027.50 + 12% of excess over $10,275 |
Over $41,775 but not over $89,075 | $4,807.50 + 22% of excess over $41,775 |
Over $89,075 but not over $170,050 | $15,213.50 + 24% of excess over $89,075 |
Over $170,050 but not over $215,950 | $34,647.50 + 32% of excess over $170,050 |
Over $215,950 but not over $323,925 | $49,335.50 + 35% of excess over $215,950 |
Over $323,925 | $87,126.75 + 37% of excess over $323,925 |
Head of Household
If taxable income is | The tax is |
---|---|
Not over $14,650 | 10% of taxable income |
Over $14,650 but not over $55,900 | $1,465.00 + 12% of excess over $14,650 |
Over $55,900 but not over $89,050 | $6,415.00 + 22% of excess over $55,900 |
Over $89,050 but not over $170,050 | $13,708.00 + 24% of excess over $89,050 |
Over $170,050 but not over $215,950 | $33,148.00 + 32% of excess over $170,050 |
Over $215,950 but not over $539,900 | $47,836.00 + 35% of excess over $215,950 |
Over $539,900 | $161,218.50 + 37% of excess over $539,900 |
Single
If taxable income is | The tax is |
---|---|
Not over $10,275 | 10% of taxable income |
Over $10,275 but not over $41,775 | $1,027.50 + 12% of excess over $10,275 |
Over $41,775 but not over $89,075 | $4,807.50 + 22% of excess over $41,775 |
Over $89,075 but not over $170,050 | $15,213.50 + 24% of excess over $89,075 |
Over $170,050 but not over $215,950 | $34,647.50 + 32% of excess over $170,050 |
Over $215,950 but not over $539,900 | $49,335.50 + 35% of excess over $215,950 |
Over $539,900 | $162,718 + 37% of excess over $539,900 |
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