Consider three unmarried investors who need to partially liquidate investments to raise cash. In this​ case, all investments have been held for 3 or more years. Investor A waited for a ​$1 comma 500 qualified dividend distribution from her mutual​ fund, and Investor B received ​$1 comma 500 in interest income from a certificate of deposit.​ However, because Investor C could not wait for a​ distribution, he decided to sell appreciated stock shares with a​ long-term capital gain of ​$1 comma 500. Assuming no​ commissions, no sales​ charges, no state income​ tax, and other taxable income of​ $100,000, which investment will provide the greatest​ after-tax amount?
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Part 1
Assuming no​ commissions, no sales​ charges, no state income​ tax, and other taxable income of​ $100,000, the investments that will have the greatest​ after-tax amount belong​ to:  ​(Select best answer​ below.)
A.
Investors A and B.
B.
Investors B and C.
C.
Investors A and C.
D.
Investors​ A, B, and C.

To determine which investor will receive the greatest after-tax amount, we need to examine the tax treatment of the income sources in question. The relevant tax rates are based on 2023 U.S. federal tax law for individuals with a taxable income of $100,000:

1. **Investor A**: Received a $1,500 qualified dividend. Qualified dividends are taxed at the capital gains rate. For an income level of $100,000, the long-term capital gains rate is typically **15%**.
   
2. **Investor B**: Received $1,500 in interest income from a certificate of deposit. Interest income is taxed as ordinary income, which at a taxable income of $100,000 falls in the **24%** tax bracket.

3. **Investor C**: Realized a long-term capital gain of $1,500 from selling stock. Long-term capital gains are taxed at the same rate as qualified dividends—**15%**.

### After-Tax Calculation:

- **Investor A (Qualified Dividend)**:  
  Tax on $1,500 at 15% = $1,500 × 0.15 = **$225**.  
  After-tax amount = $1,500 - $225 = **$1,275**.

- **Investor B (Interest Income)**:  
  Tax on $1,500 at 24% = $1,500 × 0.24 = **$360**.  
  After-tax amount = $1,500 - $360 = **$1,140**.

- **Investor C (Capital Gain)**:  
  Tax on $1,500 at 15% = $1,500 × 0.15 = **$225**.  
  After-tax amount = $1,500 - $225 = **$1,275**.

### Conclusion:
Investors A and C, who face the 15% capital gains tax rate, will receive a greater after-tax amount ($1,275) compared to Investor B, who faces the higher ordinary income tax rate (24%) and will receive only $1,140.

The correct answer is **C. Investors A and C**.

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Would you like further clarification or details on this? Here are five related questions for deeper exploration:

1. How would the outcome change if their taxable income was $40,000 instead of $100,000?
2. What happens to the tax treatment if the capital gain is short-term instead of long-term?
3. How would state income tax impact the final after-tax amounts?
4. Why are dividends and capital gains taxed at lower rates than interest income?
5. How do tax brackets change for married investors filing jointly versus individually?

**Tip:** Always consider both the type of income and the taxpayer’s marginal tax bracket to determine the true after-tax amount.

Consider three unmarried investors who need to partially liquidate investments to raise cash. In this​ case, all investments have been held for 3 or more years. Investor A waited for a ​$1,500 qualified dividend distribution from her mutual​ fund, and Investor B received ​$1,500 in interest income from a certificate of deposit.​ However, because Investor C could not wait for a​ distribution, he decided to sell appreciated stock shares with a​ long-term capital gain of ​$1,500. Assuming no​ commissions, no sales​ charges, no state income​ tax, and other taxable income of​ $100,000, which investment will provide the greatest​ after-tax amount?

Explore a detailed comparison of tax treatments for $1,500 qualified dividends, interest income, and long-term capital gains for investors with a taxable income of $100,000. Learn which investments yield the highest after-tax returns and why, based on current U.S. tax laws.

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