Question

Jane and Blair are married taxpayers filing jointly and have 2019 taxable income of $107,000. The taxable income includes $5,000 of gain from a capital asset held five years, $2,100 of gain from a capital asset held seven months, and $13,000 of gain from a capital asset held four years. All of the capital assets were stock in publicly traded corporations. Jane and Blair also have qualified dividend income of $3,000.

What is the couple’s tax on taxable income and the related tax savings from the alternative tax computation (if any)?

The couple's tax on taxable income using the alternative tax calculations is $

Answer 1

Solution:

2019 Taxable Income = $107,000

$5000 of gain from a capital assetes held five years

$2100 gain from acapital assets held Seven months

$13000 of gain from a capital assetes held four years

$3000 of qualified dividend Income

1) The Couple's tax on taxable income using the alternative tax calculation is $

Yes, Items are subjects to alternative tax computation

First we calculate their Ordinary Income and Long term capital Gain

a) Ordinary Income = Taxable Income - Gain from Capital Assets - Gain From a Capital Assets Held 4 years - Qualified Dividend Income

= $107,000 - $5,000 - $13,000 - $3,000

= $86,000

b) Long Term Capital Gain include Qualified Dividend

Long Term Capital Gain = Gain from a capital assetes held in 5 years + Gain from a Capital Assets held

in 4 years + Dividend Income

= $5000 + $13,000 + $3000

= $21,000

C) Short term Capital Gain of $21,00 will be taxed as per ordinary income tax rates

Tax Components	Tax	Computation
Tax on ordinary Income	$3,150	$21000*15%
Tax on Long term Capital Gain	$10799	{$8907+($86,000-$77,400)*22%}
Total Tax liability	$13,949

Note: Tax on Ordinary Income = Longterm Capital Gain * 15%

The Couples tax on taxable income using the alternative calculation is = $13,949

2) The Related tax savings from the alternative tax computation is

= Tax without alternative tax calculation - Current Tax

= {$8907+ ($107,000 - $77,400)*22%} -13,949

= $1,470