Quiz: Tax benefit capital, planning, following, harvest, benefit

AnalystForum

Pick one and provide explanations.


Emmanuel Qi purchased 100 shares of QRS on September 23rd. It is now September 16th of the following year, and he is planning to sell the shares to harvest a capital gain. You have advised him to wait until September 24th to sell. This is an example of:

A) deferring the timing of the tax payment.
B) minimizing the amount of the tax payment.
C) both minimizing the amount and deferring the timing of the tax payment.

infinitybenzo

B

You help in converting short term capital gain to long term capital gain. So minimize the amount of tax payment.

IAmNeil

C

By waiting to 24th before selling means you must have made profits and need to defer tax payment in order to minimize the amount to be paid.

mp3bu

B.

Advising to take as a long term capital gain instead of a short term capital gain, and presumably pay a lower tax rate on the gain.

The payment date would be the same whether you sell on September 16 or September 24; i.e. next year's tax due date.

bodhisattva

B.

Taxes are due at the same time (in the US, it would be April 15 of the following year) either way. Holding the security for > 1 year results in LTCG. I can only hope the tax questions on the exam will be this straightforward.

nannan66

Yeah, the curriculum (V2 Pg. 172) doesn't specify that we should assume a long-term, short-term capital gain time frame of one year. In fact, it lists a few different regimes.

So, given the info in the question, I'd say.... A

bpdulog

B
I think he should pay the tax based on total year, therefore he needs to pay tax due no matter he sells it on what day of that year. But by entending holding year above one year, he can gain some favorable tax rate.

jmh530

i don't think you are delaying the timing of payment. whether you pay short term or long term capital gains taxes you are still paying them on tax day.

Analti_Calte

B

Assuming LT cap gains are taxed favorably vs ST cap gains. no deferal going on.

zwjy

I stick with C...