Question

Income tax Net investment income tax Total tax liability Henrich is a single taxpayer. In 2019, his taxable income is $453,000. What is his income tax and net investment income tax liability in each of the following alternative scenarios? Use Tax Rate Schedule, Dividends and Capital Gains Tax Rates, Estates and Trusts for reference. (Do not round intermediate calculations. Round your answers to 2 decimal places. Leave no answer blank Enter zero if applicable.) A. His $453,000 of taxable income includes $45,000 of long-term capital gain that is taxed at preferential rates. B. Henrich has $196,500 of taxable income, which includes $50,600 of long-term capital gain that is taxed at preferential rates. Assume his modified AGI is $210,000.

Answer 1

Part A

Income tax	$126994
Net investment income tax	1710
Total tax liability	$128704

Description	Amount	Explanation
(1) Taxable income	453000
(2) Preferentially taxed income	45000
(3) Income taxed at ordinary rates	408000	(1)-(2)
(4) Tax on income taxed at ordinary rates	117994	(46628.50+(35%*(408000-204100))
(5) Tax on preferentially taxed income	9000	(45000*20%)
(6) Income tax	$126994
(7) Net investment income tax	1710	As MAGI exceeds $200,000, the entire $45000 long-term capital gain is subject to the 3.8% net investment income tax ($45000 x 3.8% = $76).
Total income & net investment income tax	$128704	(6) + (7)

Part B

Income tax	$36781
Net investment income tax	380
Total tax liability	$37161

Description	Amount	Explanation
(1) Taxable income	196500
(2) Preferentially taxed income	50600
(3) Income taxed at ordinary rates	145900	(1)-(2)
(4) Tax on income taxed at ordinary rates	29191	(14382.50+(24%*(145900-84200))
(5) Tax on preferentially taxed income	7590	(50600*15%)
(6) Income tax	$36781
(7) Net investment income tax	380	3.8% of lesser of (a) $50600 net investment income (b) 10000 (210000-200000)
Total income & net investment income tax	$37161	(6) + (7)