Question

During the current year, Ron and Anne sold the following assets: (Use the dividends and capital gains tax rates and tax rate schedules.)

Capital Asset	Market Value		Tax Basis		Holding Period
L stock	$	50,000	$	41,000	> 1 year
M stock		28,000		39,000	> 1 year
N stock		30,000		22,000	< 1 year
O stock		26,000		33,000	< 1 year
Antiques		7,000		4,000	> 1 year
Rental home		300,000*		90,000	> 1 year

*$30,000 of the gain is 25 percent gain (from accumulated depreciation on the property).

Ignore the Net Investment Income Tax.

Tax Rates for Net Capital Gains and Qualified Dividends

Rate*	Taxable Income
	Married Filing Jointly	Married Filing Separately	Single	Head of Household	Trusts and Estates
0%	$0 - $78,750	$0 - $39,375	$0 - $39,375	$0 - $52,750	$0 - $2,650
15%	$78,751 - $488,850	$39,376 - $244,425	$39,376 - $434,550	$52,751 - $461,700	$2,651 - $12,950
20%	$488,851+	$244,426+	$434,551+	$461,701+	$12,951+

a. Given that Ron and Anne have taxable income of only $20,000 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2019 assuming they file a joint return?

b. Given that Ron and Anne have taxable income of $400,000 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2019 assuming they file a joint return?

Answer 1

During the current year, Ron and Anne sold the following assets: (Use the dividends and capital gains tax rates and tax rate schedules.

During following the current asels : (use year, Ron and the dividends Anne and sold the capital gains tone rabu and tax rate schedule. An As per IRS at rater greater Capital that 20% gains . may be in the following tared cases: 1) The part tomable qualified of a businen gaus from stock es selling torced section at a 1202 small Karen 957 role 2) Net capital gains from selling section 1202 qualified Small business stock et taxed at a maxinum 28% rate 3) The from at pottion of any unrecaptured selling section 1950 sual property a mayirturo asi. yok Section is (250 gain taxed

Capital Shott and gain losses can be set off team capital loss can be set long term gains with off capital gains. with short term Net Toxable income of Ron and Anne Calculation of au as follows: Capital short term Calinflou) amer long term Gain I (ran rate Stock L $9.000 151 stock N $11,000 s. Stock N $ 8,050 ISH - $7,000 Antiques $ 3,000 acy. Rental Gain 15% $ 1,80,000 On-recaptured 251 $ 30,000 gain $1,000 $2,11,000 Total

A) Cross Ian nability for 2019 - Total femabte home - $ 2,32,000 ( $20,000 + 1,000+ $9,11,000) Income Amount Tax rate Tone ticarety Ondinary Income $20,000 OX Sholt terms gain $1,000 151 $150 long tum gain $478,000 151 $ 26,700 on recaptured gaun $ 30,000 25% $ 840 Antique $3000 281 $ 7,500 Total tas liability $ 35,190 B) Gross the licability for 2014 - Total taxable income &$ 6, 12,000 ($4,00.000 +$ 1,000 $2,11,000) Income slab Amount Taxrate Tax liability Ordinary income upto $78,750 $78,750 0% Oxdinaly income $78,751 - 488850 $ 321,950 154. $ 48,188 Shat team gais $78,751 - $1,000 151 $150 $486,850

$ 118,000 Not $ 26,700 long term goin applicable $ 840 $ 30,000 25% un-recaptured gain Not applicable Not Antique $4.500 $3,000 96). applicable $83,37%. Total liability