After Tax Return with Distributions

Tartaglia · June 20, 2018, 5:00pm

EOC question 8 in Reading 9 has a mistake I think. Can someone double check?

distributions

Int : 0.2

Div: 0.3

cap gains: 0.4

tax

Int : 0.35

Div: 0.15

cap gains: 0.25

Their T* is 0.318 but I get 0.05.

Tartaglia · June 20, 2018, 5:10pm

folks, never mind. I used the distribution rate for cap gains in the end instead of tax on cap gains. Mah bad. Everything cool.

KentC · June 20, 2018, 5:11pm

T* = t_cg(1 – p_d – p_i – p_cg)/(1 – p_dt_d – p_it_i – p_cgt_cg)

= t_cg(1 – 0.30 – 0.20 – 0.40)/[1 – (0.30)(0.15) – (0.20)(0.35) – (0.40)(0.25)]

= 0.0318

Moonborne · June 20, 2018, 5:15pm

wartr = 0.2x0.35 + 0.3x0.15 + 0.4x0.25 = 0.215

T* = 0.25x[(1-0.2-0.3-0.4)/(1-0.215)] = 0.0318

By the way this question turned up in a previous mock and they didn’t use T* only wartr, so ignoring deferred capital gains… don’t remember the exam anymore though.

PreDRaR66 · June 20, 2018, 5:17pm

I’m getting .0318 but not .318.