Paying taxes on stocks

What does it mean to invest in stocks?

Common stock is considered to be one of the most popular investment vehicles for long$-$term wealth building. Investors earn income from common

stock in the form of dividends and$/$or capital gains. As an investor it is important to understand the implications of investing in stocks from a tax

perspective.

Calculating taxes owed on Paolo's investment

Two years ago, Paolo purchased $100$ shares of a particular company's stock at a price of $$119\mathrm{.}28$ per share. Last year, Pannual

dividend of $$1\mathrm{.}15$ per share, and at the end of the year, a share of stock was trading at $$119\mathrm{.}83$ per share. This year,

dividend of $$1\mathrm{.}26$ per share and at the end of the year sold all $100$ shares at a price of $$130\mathrm{.}04$ per share.

In the first column of the following table, enter the total annual dividends Paolo received each year, as well as the total capital gains at the end of

each year.

Suppose Paolo is in the $32\%$ tax bracket.

Compute the taxes Paolo pays each year on dividends and capital gains from this investment by completing the second column in the table.

Note: Throughout this problem, please round your answers to the nearest cent.

Amount

Taxes Owed

Year $2$ Dividends:

Capital Gains:

The total amount of investment income $($pre$-$taxes$)$ that Paolo earned on this investment over the course of $2$ years is

The total amount that Paolo pays in taxes on income from this investment income is $[$