Schw Vol2, Ex2AM Ques 1 IPS and Taxes Ques?? investment, account, capital, needed, return

wilslm

In calculating the after tax nominal return for the coming year the answer key shows $116,438 needed from the portfolio. I converted the $116,438 into $152,250 to compensate for the 25% taxes that would be paid when withdrawing this from the investment portfolio.
Did they not tax the withdrawals from the investment account b/c it did not specifically state that withdrawals are taxed - only income and capital gains???

dyga

anytime you withdraw from the portfolio , you have to “realize” gains ( by selling out of those investments). However in a tax free account , those gains are taxed at withdrawal time. I don’t think there is a big contradiction here.
However Schweser is full of other typographical errors. e.g. They do not ask for Unique in the question but show it in template etc.etc.

dyga

Ah, thx… read the ques again and the windfall is after tax and not from an investment portfolio so no need to tax it again at withdrawal. These mistakes are getting old when you feel like you understand the material!