Question

Matt and Meg Comer are married and file a joint tax return. They do not have any children. Matt works as a history professor at a local university and earns a salary of $64,850. Meg works part-time at the same university. She earns $34,150 a year. The couple does not itemize deductions. Other than salary, the Comers’ only other source of income is from the disposition of various capital assets (mostly stocks). (Use the tax rate schedules,Dividends and Capital Gains Tax Rates.) (Round your final answers to the nearest whole dollar amount.)

a. What is the Comers’ total income tax liability for 2019 (including income tax on wages) if they report the following capital gains and losses for the year?

Short-term capital gains $ 9,230

Short-term capital losses (2,230 )

Long-term capital gains 15,450

Long-term capital losses (6,450 )

Answer 1

Ordinary income and short term capital gain are taxed at a ordinary income tax rate. But long term capital gain is taxed at a differentiated rate ,which is lower than ordinary income tax rate.

Calculation for net long term capital gain :

Long term capital gain = $ 15,450

Less : Long term capital loss = $ 6,450

Net Long term capital gain = $ 9,000

No tax liability is there for net long term capital gain up-to $ 78,750 for married and filing jointly couple .

So, long term capital gain tax = $ 0

Calculation for net short term capital gain :

Short term capital gain =   $ 9,230

Less: Short term capital loss = $ 2,230

Net short term capital gain = $ 7,000

Calculation for net taxable income

Matt, ordinary income = $ 64,850

Meg, ordinary income =     $ 34,150

Gross ordinary income = $ 99,000

Add: Net short term capital gain = $ 7,000

Adjusted gross income   = $ 106,000

Less: Standard deduction = $ 24,400

Net taxable ordinary income = $ 81,600

Calculation for net tax liability for ordinary income and short term capital gain:

Taxable income	Tax bracket	Tax liability
$ 0 to $ 19,400	10%	$1,940
$ 19,401 to $78,950	12%	$7,146
$ 78,951 to $ 81,600	22%	$ 583
	Tax liability on ordinary income and short term capital gain =	$9,669
	Add: Tax liability in long term capital gain	$ 0
	Total income tax liability	$9,669