Question

Samuel Jenkins made two investments; the first was 14 months ago and the second was two months ago. He just sold both investments and has a capital gain of $4,500 on each. If Samuel is single and has taxable income of $40,000, what will be the amount of capital gains tax on each investment? See Capital Gains table and Taxable income rate table.

Answer 1

The amount of capital gains tax is computed as shown below:

Tax on Investment 1 which is held for 14 months is computed as follows:
Capital gains tax = Long-term capital gains tax rate × Capital gain
= 0.15 × $ 4,500
= $ 675
Tax on investment 2 which is held 2 months is computed as follows:
Capital gains tax = Short-term capital gains tax rate × Capital gain
= 0.28 × $ 4,500
= $ 1,260

Feel free to ask in case of any query relating to this question