How much does rodrigo tax liability decrease

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Question - Income Conversion: Rodrigo owns 1 share of Berkshire Hathaway Class A stock that he purchased 50 weeks ago for $250,000. The stock is currently worth $325,000, and Rodrigo wants to sell the stock soon. Rodrigo is in the 37% marginal tax bracket.

1. If Rodrigo sells the stock today for $325,000, he will have taxable gain of $75,000. The gain will be short-term capital gain and will be taxed at Rodrigo's marginal tax rate and will also be subject to the 3.8% net investment income tax. What will Rodrigo's tax liability be on the gain from the sale of the stock?

2. If Rodrigo sells the stock in 3 weeks for $325,000, he will have taxable gain of $75,000. The gain will be long-term capital gain taxed at 20% and will also be subject to the 3.8% net investment income tax. What will Rodrigo's tax liability be on the gain from the sale of the stock?

3. How much does Rodrigo's tax liability decrease if he holds the stock long enough to convert the earnings from short-term to long-term capital gain?

Reference no: EM132131606

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