Question

Problem 14-65 (LO. 5)

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.

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Indicate whether the following items are subject to the alternative tax computation. Select "Yes" if subject to the alternative tax computation; otherwise select "No".

a. $5,000 of gain from a capital asset held five years Yes b. $13,000 of gain from a capital asset held four years Yes c. $3,000 of qualified dividend income Yes d. $2,100 of gain from a capital asset held seven months No

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 $...................

The related tax savings from the alternative tax computation is $.............

Answer 1

Solution: Yes! Items are subjects to alternative tax computation. Particulars Amount 2019 taxable income $107.000.00 $5,000 of gain from a capital asset held five years $5,000.00 $13,000 of gain from a capital asset held four years $13,000.00 $3,000 of qualified dividend income $3,000.00 Ordinary income $86,000.00 First we should calculate their ordinary income and long-term capital gain. Particulars Amount $5,000 of gain from a capital asset held five years $5,000.00 $13,000 of gain from a capital asset held four years $13,000.00 $3,000 of qualified dividend income $3.000.00 Long-term capital gain $21,000.00 note: short-term capital gain of $2.100 will be taxed as per ordinary income tax rates. Tax components Tax on ordinary income Tax on LTCG | Tax Workings $3,150.00 $21,000*15% $10,799.00 $8,907 +($86,000- 77,400)*22% $13,949.00 Total tax liability

Tax savings from the alternative tax computation=Tax without alt. tax calculation - Current tax = [$8,907 +(107,000-77,400)*22- $13,949 15419 - 13949 1470