Daniel is considering selling two stocks that have not fared well over recent years. a friend recently informed daniel that one of his stocks has a special designation, which allows him to treat a loss up to $44,000 on this stock as an ordinary loss rather than the typical capital loss. daniel figures that he has a loss of $52,800 on each stock. if daniel’s marginal tax rate is 35 percent and he has $105,600 of other capital gains (taxed at 15 percent), what is the tax savings from the special tax treatment?

Tax saving will be = $8800

Explanation

                          Special stock                                Normal stock

Loss                      -52,800                                  -52,800

ordinary loss            15400   [44000*.35]            NA

Capital loss         1320     [(52800-44000)*.15]       7920   [52800*.15]

Total savings         15400+ 1320= 16720                  7920

Tax saving will be = 16720 - 7920 = $8800

answer; depth;

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.