My wife and I just sold private stock worth $188,100. What will our total state and federal taxes be on this?

Question

We live in Virginia. Total household income is $84,000. The private stock was free to us (me) years ago from a family business worth about $85 million. What will be our federal and state taxes on this check?

Answer 1

Normally when you sell stock the amount of actual profit or loss is figured by comparing what you bought it at and what it sold for.

In this case since you recieved the private stock for "free" we'll have to assume you paid $0 for it, so the entire $188,100 counts as taxable income, with your household income of $84,000 that's a total of $272,100 for the year.

For simplicity, lets assume that it is just you and the wife filing a joint return, neither of you are blind, your younger that 65, no kids, no special credits or deductions, and no itemized deductions. Your 1040 would look something like this:

Line 38) 272,100
Line 39) BLANK
Line 40) 10,300 (Standard Deduction MFJ)
Line 41) 261,800 (Line 38 - Line 40)
Line 42) 4928 (Based on 1040 Instructions, p.36)
Line 43) 256,872 (Line 41 - Line 42) [TAXABLE INCOME]

Line 44) 63,968 [TAX LIABILITY]

Based on the 2007 Tax Rate for Married Filing Jointly (Schedule Y-1)
http://www.irs.gov/formspubs/article/0,,id=164272,00.html
43,830.50 + [(256,872 - 195,850) x0.33]

Basically you'll OWE $63,968 to the IRS, but this does not include your withholdings or any credits and special deductions you may be eligible for, so there is a change you'll actually owe less, but if you have other sources of income (that you didn't mention) other that the stocks and the 84k in household income, then you may owe more. You'll also OWE STATE TAXES, but I can't tell you for sure what that amount would be.

If you haven't recieved the check from the bank/broker that sold the stock for you ask them to withhold 50% of it for Federal (35%) and state (15%) income taxes. If they already transfered the money and did not withhold anything (i.e. you got the full $118,100) then you need to SET ASIDE HALF AND DON'T TOUCH IT UNTIL YOU FILE YOUR TAXES.

The 35% should cover the base tax liability to the IRS and the 15% should cover what you'll owe on the state, plus you'll have a little bit of a cushion. Once you file and apply your credits and deductions, dependents, etc. then whatever withholdings that exceeded your tax liability will be given back to you in your refund.

I know that 50% sounds very high, but it's a good figure to play things safe so that you don't owe the government. The IRS and State Revenue offices have the ability to freeze/tap accounts and assets if you don't pay your taxes, and I'm just trying to give you the best advise I can to avoid that misery.

Answer 2

The Federal Government waste more money than the Private sector. I once worked for the Federal Government and I saw so much waste and people that would come to the building but didn't nothing all day. I couldn't stand seeing that so many people were hired without them having any responsibility I mean absolutely zero work to do. That is a waste of the tax payers money. Once you have been hired and are there for three years you can't be fired. I finally quit and went to work in the Private sector where people actually work for their pay. I would have to say no to your question. The Federal government knows how to spend money but they don't know how to save money. They spend all they have and more. Therefore they do not know how to manage money or the Country. I agree with Mike Huckabee about term limits.

Answer 3

Without knowing your basis in the stock it's not possible to say. Even if you didn't pay for it, you may still have some basis other than $0, such as if you inherited it or if it was given to you as a gift. In theory your basis could be higher than what you realized on the sale, in which case there would be no tax at all.

Since you held it for over one year the Federal rate is 15% unless your marginal rate is already 15% or less in which case it would be 5%. The tax rate is applied to the gain and without knowing your basis there's no way to calculate your gain.

Answer 4

Free to you how? If you inherited it, you probably have some basis. If it was a gift, you probably have some but maybe not, or at least not any that you can track down.

If it is long term Gain you will pay 15% tax to the fed and state. I do not know virigina law. Some states have a capital gain rate, some don't. I am in CO and if it was a CO company, you could exclude the gain in certain situations.

Hire a CPA,

Answer 5

Federal - probably 15% of the stock amount or $28,215. State - around $10,800. Will leave a nice sum for you and your wife.

Answer 6

Call the IRS, they will tell you what percent the tax would be
I think it is 28% but I'm not positive, and if you rolled it over
into an IRA or Roth IRA, you might not have to pay anything

Answer 7

You need to check with a tax attorney and see what they say . good luck .

Answer 8

I don't know, but congratulations.