Question

Michelle is a head of household, she has $27,000 of taxable income in 2015 from non-capital gain or loss sources, and has the following capital gains and losses:

Sale of Red Stock- long-term capital gain $4,300

Sale of Blue Stock- long-term capital loss (2,000)

Sale of Green Stock- long-term capital gain 19,000

Sale of Purple Stock- short-term capital loss (1,700)

Sale of her personal motorcycle- long term loss (350)

Determine Michelle's taxable income.

-Answer and Please Show Work

Answer 1

Computation of Michelle's taxable income for the year end 2015

Particulars Amount($) Amount($)

1.Income in 2015 from non-capital gain or loss sources 27,000.00

2. Sale of Red Stock- long-term capital gain 4300

3. Sale of Blue Stock- long-term capital loss -2000 2,300.00

  

4. Sale of Green Stock- long-term capital gain 19,000

5. Sale of Purple Stock- short-term capital loss -1700 17,300.00

6. Sale of her personal motorcycle- long term loss (Note 2) 0.00

Adjusted Gross Income (AGI) 46,600.00

exemption amount (2015) 4000.00

Taxable income 42,600.00   

Note:

1. In case of Capital gain arising from sale of stock the loss from such sale may be long term or short term. In case of Long-term capital loss, such loss shall be adjusted against the long-term capital gain only. But in case of short-term loss such loss can be adjusted against the long-term capital gain or short-term capital gain.

2. If you sell it for less than the original purchase price, it's considered a capital loss. This means you do not have to report it on your tax return.

However, if you sell it for a profit (higher than the original purchase price), or what is called a capital gain, you must report the windfall on your income tax return and pay taxes on it