Reference no: EM131750371

Beth purchased 20,000 shares of C corporation stock for $5 per share on August 1, 2015. On September 1, 2015, the stock jumped to $10 per share. Beth would like to sell her stock for the maximum after-tax return possible, taking into account the time value of money. After considering the sale of the stock, Beth would be subject to the 39.6% tax bracket in both 2015 and 2016. You may ignore the 3.8% net investment income surtax for this calculation. Beth has asked you whether she should sell her 20,000 shares of C corporation stock in 2015 for $10 per share or wait until after August 1, 2016 and sell the 20,000 shares at that time. She projects the value of the stock to drop slightly and anticipates that she could sell the stock after August 1, 2016 for $9 per share. Based on current interest rates, assume that it is appropriate in your analysis to use a one-year present value factor of .980. Assuming Beth's projection of the C corporation stock value is correct and taking the time value of money into account, on what date would you advise Beth to sell her 20,000 shares of stock, September 1, 2015, or after August 1, 2016? To support your answer, calculate Beth's after tax proceeds: (1) as if she sold the 20,000 shares of C corporation stock on September 1, 2015 for $10 per share; and (2) as if she sold the 20,000 shares of C corporation stock after August 1, 2016 for $9 per share. Please show your work and explain your calculations.