Question

In 2000, Ms. Ennis, a head of household, contributed $79,000 in exchange for 790 shares of Seta stock. Seta is a qualified small business. This year, Ms. Ennis sold all 790 shares for $119,000. Her only other investment income was an $9,000 long-term capital gain from the sale of land. Her taxable income before consideration of her two capital transactions is $522,000. Assume the taxable year is 2018. Use Individual tax rate schedules and Tax rates for capital gains and qualified dividends.

How would the computation change if Ms. Ennis acquired the Seta stock in 2015 instead of 2000?

Answer 1

ANSWER:

In this case it is to be assumed that the stocks of seta are purchased in the year 2015 instead of 2000 . the tax rate liability is to be calculated . as the stocks are not held by Ms. Enni for more than five years the deduction of 50% will not be provided.

Taxable income will be calculated.

Particulars	Amount$
Ordinary taxable income	522000$
Long term capital gain(119000-79000)	40000$
Other long term capital gain	9000$
Taxable income	571000$

Hence, the taxable income is $571000

Tax liability will be calculated

particulars	Amount$
Tax on ordinary income	185158
Tax on capital gain	9800
Medicare contribution tax	1862
Tax liability	196820