Answer: Option a) $1700
Explanation:
Computation of Tax liability of Jacksons total tax liability:
Particular | Capital Gain | Tax Rate | Tax liability |
Gain from sale of Coin Collection (held 3 years) | $ 5,000.00 | 28% (See note 1) | $ 1,400.00 |
Gain from sale of Stock LMN held as
investment for 6 years ( It is long term gain and setoff of $2000 can be taken from sale of stock XYZ) ($4000-$2000) |
$ 2,000.00 | 15% | $ 300.00 |
Gain from sale of Stock ABC held as investment for 10 months ( It is short term gain and Fully setoff of $1000 can be taken from sale of stock XYZ) ($1000-$1000) | $ - | 22% | $ - |
Tax Liability | $ 1,700.00 |
Note 1: The U.S. Internal Revenue Service (IRS) categorizes gold and other precious metals as “collectibles” which are taxed at a 28% long-term capital gains rate.
Investment held for more than 1 year to be termed as Long term and less than 1 year to be term as short term and accordingly gain arising from such investment will be classified as long term or short term.
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