Question

e. Married, filing jointly 9. Perry, a single taxpayer, has taxable income of $178,000 and is in the 32% tax bracket. During 2019, he had the following capital asset transactions: $30,000 Gain from the sale of a stamp collection (held for 10 years) Gain from the sale of an investment in land (held for 4 years) 10,000 4,000 Gain from the sale of stock investment (held for 8 months) Perry's tax consequences from these gains are as follows: a. (15% x $30,000)+ (32% x $4,000). b. (15% x $10,000) + (28% x $30,000)+ (32% x $4,000). c. (0% x $10,000) + (28% x $30,000) + (32% x $4,000). d. (15% x $40,000) + (32% x $4,000). X e. None of these. 2

Answer 1

Answer -

Step - ( 1 ) - Facts of the Question given -

Perry, a Single taxpayer, has taxable income of $178000, and is in the 32% tax bracket. During 2019, he had the following capital assets transactions :-

Gain from the sale of a stamp collection ( held for 10 years ) = $30000.

Gain from the sale of an investment in land ( held for 4 years ) = $10000.

Gain from the sale of stock investment ( held for 8 months ) = $4000.

.

Step - ( 2 ) - Analysis -

Relevant Capital Gain rules -

• Gain from the sale of a stamp collection are taxed at a 28% rate, regardless of taxable income.
• Long-term capital gain tax is levied on the profits from sale of assets held for more than a year,
• Long-term capital gain tax rate is 15% for Single taxpayers having taxable income between $39376 to $434550.
• Short-term capital gain tax is applies to assets held for a year or less, and is taxed as Ordinary income.

In the given case,

Gain from the sale of a stamp collection ( held for 10 years ) of $30000 is to be taxed at the rate of 28%.

Gain from the sale of an investment in land ( held for 4 years ) of $10000 is a Long-term capital gain and Perry is a Single taxpayer having taxable income of $178000. So, long-term capital gain is to be taxed at the rate of 15%, because taxable income is between $39376 to $434550.

Gain from the sale of stock investment ( held for 8 months ) of $4000 is a Short-term capital gain and is to be taxed as Ordinary income at the rate of 32%, because Perry is in the 32% tax bracket.

.

Step - ( 3 ) - Conclusion -

Therefore, Option - ( b ) (15% x $10000) + ( 28% x $30000) + (32% x $4000) is Correct.