Calculate the after tax yields on the foregoing investments, assuming the Brittens have a 28% marginal tax rate (based on Public Law 108-27, The Jobs and Growth Relied Reconcilliation Act of 2003)
The condominium-expected annual increase in market value = 5%.
High Yield corporate stocks-expected dividend yield = 8%.
Savings account in a commercial bank -expected annual increase in market value = 10%; expected dividend yield = 0. PLEASE HELP, candy
A yield of 10% on a bank savings account (through accrued interest) is totally unrealistic, but the after-tax yield would be (1-0.28) x 10% = 7.2%, since the earnings would be treated as ordinary income.
Stock dividends would be taxed at 15%, assuming the Brittens were not subject to AMT, so the after-tax yield of the high-yield stocks would be 0.85 x 8% = 6.8%
The expected annual condo increase in value of 5% would be treated as long-term capital gains if they own the property long enough. That tax rate is 15% so the effective yield would be 0.85x5% = 4.25%, but there would be the additional benefits of not having to pay rent, less the disadvantages of having to pay for property tax, insurance and maintenance.
Thank you!
candy!
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