What It Means 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.

Two years ago, Albert purchased $100$ shares of a particular company's stock at a price of $$105\mathrm{.}25$ per share. Last year, Albert received an annual

dividend of $$1\mathrm{.}45$ per share, and at the end of the year, a share of stock was trading at $$110\mathrm{.}84$ per share. This year, Albert received an annual

dividend of $$1\mathrm{.}60$ per share and afterward sold all $100$ shares at a price of $$121\mathrm{.}05$ per share.

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

each year.

Suppose Albert is in the $28\%$ tax bracket. Compute the taxes Albert pays each year on dividends and capital gains from this investment by completing

the second column in the table.

Calculating Taxes Owed on Albert's Investment

Amount

Taxes Owed

Year $1$ Dividends:

Capital Gains:

Year $2$ Dividends:

Capital Gains:

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

The total amount that Albert pays in taxes on income from this investment income is