Part A
Ron and Anne’s netting process is reflected in the following table:
Description |
Short-Term |
Long-Term 28% |
Long-Term 25% |
Long-Term 0/15/20% |
Stock N |
$9800 |
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Stock O |
$(5200) |
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Step 1: |
$4600 |
|||
Antiques |
$4800 |
|||
Unrecaptured §1250 Gain |
$30,000 |
|||
Remaining Gain from Rental Property |
$181800 |
|||
Stock L |
$10800 |
|||
Stock M |
$(9200) |
|||
Step 2: |
$183400 |
|||
Steps 3(B): Go to step 6 |
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Step 4 : Go to step 5 |
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Step 5 : |
$4600 |
$4800 |
$30,000 |
$183400 |
Ron and Anne’s ordinary income will increase from $23600 to $28200 due to their $4600 net short-term capital gain. Ron and Anne’s gross tax liability of $32320 is computed as follows:
Amount and Type of Income |
Applicable Rate |
Tax |
Explanation |
$19400; ordinary |
10% |
$1,940 |
$19,400 × 10% The first $19,400 of Ron and Anne’s $28200 of ordinary income is taxed at 10% |
$8800; ordinary |
12% |
$1056 |
$1,950 × 12%. Ron and Anne’s remaining $8800 of ordinary income (28200 – 19,400) is taxed at 12%. |
$30,000; 25% rate capital gain |
12% |
$3,600 |
$30,000 × 12% The 25% gains are taxed at the lower of Ron and Anne’s marginal tax rate (12%) or 25%. In this case, the $30,000 of gains will be taxed at 12%. |
$4800 28% rate capital gains |
12% |
$576 |
$4800 × 12% The 28% gains are taxed at the lower of Ron and Anne’s marginal tax rate (12%) or 28%. In this case, the $3,000 of gains will be taxed at 12%. |
$15750; 0/15/20% rate capital gains |
0% |
$0 |
$15750 × 0% $15750 ($78750 - $28200 ordinary income - $30,000 25% capital gain - $4800 28% capital gain) of 0/15/20% rate capital gain fits into the remaining space below the maximum zero rate amount ($78750), so it is taxed at 0%. |
$154,800; 0/15/20% rate capital gains |
15% |
$25148 |
$167650 × 15% All of the remaining $154,800 ($183400 - $15750) of 0/15/20% capital gain is taxed at 15% because Ron and Anne’s taxable income (including the gains) is above the maximum zero rate amount ($78750) and the maximum 15-percent rate amount ($488850). |
Gross tax liability |
$32320 |
Part B
Ron and Anne’s ordinary income will increase from $403,000 to $407800 due to their $4800 net short-term capital gain. Ron and Anne’s gross tax liability of $134601 is computed as follows:
Amount and Type of Income |
Applicable Rate |
Tax |
Explanation |
$19,400; ordinary |
10% |
$1,940 |
$19,400 × 10% The first $19,400 of Ron and Anne’s $407800 of ordinary income is taxed at 10% (see MFJ tax rate schedule for this and other computations). |
$59550; ordinary |
12% |
$7146 |
$59550 × 12%. The next $58,350 ($78950-19400) of Ron and Anne’s $407800 of ordinary income is taxed at 12%. |
$89450; ordinary |
22% |
$19679 |
$89450 × 22% The next $87,600 ($168400-$78950) of Ron and Anne’s $407800 of ordinary income is taxed at 22%. |
$153050; ordinary |
24% |
$36732 |
The next $153050 ($321450-$168400) of Ron and Anne’s $407800 of ordinary income is taxed at 24% |
$86350 |
32% |
$27632 |
The remaining $86350 ($407800 - $321450) of Ron and Anne’s $407800 ordinary income is taxed at 32%. |
$81050; 0/15/20% rate capital gains |
15% |
$12158 |
$81050 × 15% $78,000 ($488850 - $407800 ordinary income) of 0/15/20% rate capital gain fits below the maximum 15-percent rate amount ($488850), so it is taxed at 15%. |
$100,000; 0/15/20% rate capital gains |
20% |
$20470 |
$102350 × 20% All of the remaining $133,000 ($183400 - $81050) of 0/15/20% capital gain pushes Ron and Anne’s taxable income above the maximum 15-percent rate amount ($488850) so it is taxed at 20%. |
$30,000; 25% rate capital gains |
25% |
$7,500 |
$30,000 × 25% |
$4800; 28% rate capital gains |
28% |
$1344 |
$4800 × 28% |
Gross tax liability |
$134601 |
During the current year, Ron and Anne sold the following assets: (Use the dividends and capital...
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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...
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...
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Required information (The following information applies to the questions displayed below.) 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 L stock M stock N stock O stock Antiques Rental home Market Value $ 50,000 28,000 30,000 26,000 7,000 300,000* Tax Basis $41,000 39,000 22,000 33,000 4,000 90,000 Holding Period > 1 year > 1 year < 1 year < 1 year > 1...
Trisha, who is single and has taxable income of $300,000, sells the following capital assets in 2019 with gains and losses as shown. With accurate calculations please. Asset Gain or (Loss) Holding Period A $15,000 15 months B 7,000 20 months C (3,000) 14 months a. Determine Trisha’s increase in income tax liability as a result of the three sales. All assets are stock held for investment. Ignore the effect of increasing AGI on deductions and phaseout amounts. b. Determine...
Stock A 7500 <1 year 11000 >1 year Stock B 9000 401200 <1 year Stock C 5200 2700 >1 year Stock D 7500 2500 Antiques >1 year 20000 19000 >1 year Rental Property 110000 119000 Married Filing Jointly 346,000 Marital status Ordinary income before capital gains (losses) For AGI deductions None None Itemized deductions Standard deduction 24,400 QBID None Tax credits None Using the taxpayer information and sales data below, net any capital gains and losses, apply the capital gain...
58. Carrie, a single individual has two sales of stock during the current year. The first sale produces a short-term loss of $10,000 and the second sale results in a long-term gain of $40,000. Carrie's taxable income without considering the gain is $150,000. Carrie's stock transactions will increase her income tax liability by: a. SO b. $4,500 ©. $6,000 d. $8,400