Question

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 year > 1 year *$30,000 of the gain is 25 percent gain (from accumulated depreciation on the property). Ignore the Net Investment Income Tax. a. Given that Ron and Anne have taxable income of only $20,000 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2020 assuming they file a joint return? (Round all your intermediate computations to the nearest whole dollar amount.) Gross tax liability

Answer 1

Ans Q a]

Capital Asset	Market Value $	Tax Basis $	Holding Period	Individual Income	Capital Gain
L Stock	50,000	41,000	> 1 year		9,000
M Stock	28,000	39,000	> 1 year		-11,000
N Stock	30,000	22,000	< 1 year	8,000
O Stock	26,000	33,000	< 1 year	-7,000
Antiques	7,000	4,000	> 1 year		3,000
Rental Home	3,00,000	90,000	> 1 year		2,10,000
Ordinary Income				20,000
				21,000	2,11,000

Capital Gain Tax on 2,11,000 at 15% [80,001-49600 slab] 31,650 31650

Individual Income Tax 0 to 19,750 10% 19,750 1,975

[Married & jointly filed]    19,750 to 21,000    12% 1,250 150 2125

Total Tax Payable 33,775

Ans b If Ron & Anne 's income is $4,00,000 before capital gain then their total tax liability will be --

Capital Asset	Market Value $	Tax Basis $	Holding Period	Individual Income	Capital Gain
L Stock	50,000	41,000	> 1 year		9,000
M Stock	28,000	39,000	> 1 year		-11,000
N Stock	30,000	22,000	< 1 year	8,000
O Stock	26,000	33,000	< 1 year	-7,000
Antiques	7,000	4,000	> 1 year		3,000
Rental Home	3,00,000	90,000	> 1 year		2,10,000
Ordinary Income				4,00,000
				4,01,000	2,11,000

Capital Gain Tax on 2,11,000 at 15% [80,001-496000 slab] 31,650 31650

Individual Income Tax 0 to 19,750 10% 19,750 1,975

[Married & jointly filed]    19,750 to 80,250 12% 60,500 7,260

80,250 to 171,050 22% 90,800 19,976

1,71 050 to 3,26,600 24% 1,55,550 37332

326600 to 4,01,000 32% 74400 23808 90351

Total Tax Payable 1,22,001