First off, capital gains are already taxed at the corporate level. Stock is a share of a taxable firm. A firm’s shares trade at a multiple of forward earnings. If the Street thinks XYZ will earn $1/share before taxes in the next 12 months, and its P/E is 10, and it is taxed at 35%, then a share of XYZ will trade at $6.50, not $10. If XYZ announces a new contract and now the Street thinks it will earn $1.20 before taxes, the stock doesn’t go up $2/share – it goes up $1.30/share. The gain is already reduced by virtue of the corporate level taxed.
So there shouldn’t be any tax – but there is one, albeit a lower one.
But that lower rate applies only if you’ve held the asset for a year or more. Why?
2007-07-20
04:20:53
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8 answers
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asked by
truthisback
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in
Politics