Question

what number will go on the tax return for #14?

14. On June 7 and 8, 2018, the Danes held a garage sale to dispose of unwanted furniture, appliances, books, bicycles, clothes, and one boat (including trailer). The estimated basis of the items sold is $25,500. All assets were used by the Danes for personal purposes.

Answer 1

Here assumed that Dane's regular income is $16,700 in every year and no other income, on such total income, tax paid of $1,500.00 in the year 2017.

Assumed that in the year 2018 also will repeat the same and additionally he get the return from the sale of unwanted assets sale. And assumed that such asset cost value is negligible or treated as nill so, total sale value is the total gain.

Therefore the total income shown in the return for the year 2018 is $42,200.00

Here assumed that those assets hold more than or equal to 12 months and such person is US resident and on any gain on sale of assets should pay tax at the rate 37%. Here Dane is US resident so 37% of tax rate will apply.

Tax calculations are as below:

Tax on $16,700.00 regular income is same as last year i.e 2017   -           $1,500.00

Tax on capital gain ($25,500*37%) -           $9,435.00

Total tax payable is -           $10,935.00