Question

In: Accounting

In 2018, Tom and Amanda Jackson (married filing jointly) have $200,000 of taxable income before considering...

In 2018, Tom and Amanda Jackson (married filing jointly) have $200,000 of taxable income before considering the following events: (Use the dividends and capital gains tax rates and tax rate schedules.)

  1. On May 12, 2018, they sold a painting (art) for $110,000 that was inherited from Grandma on July 23, 2016. The fair market value on the date of Grandma’s death was $90,000 and Grandma’s adjusted basis of the painting was $25,000.
  2. They applied a long-term capital loss carryover from 2017 of $10,000.
  3. They recognized a $12,000 loss on the 11/1/2018 sale of bonds (acquired on 5/12/2008).
  4. They recognized a $4,000 gain on the 12/12/2018 sale of IBM stock (acquired on 2/5/2018).
  5. They recognized a $17,000 gain on the 10/17/2018 sale of rental property (the only §1231 transaction) of which $8,000 is reportable as gain subject to the 25 percent maximum rate and the remaining $9,000 is subject to the 0/15/20 percent maximum rates (the property was acquired on 8/2/2012).
  6. They recognized a $12,000 loss on the 12/20/2018 sale of bonds (acquired on 1/18/2018).
  7. They recognized a $7,000 gain on the 6/27/2018 sale of BH stock (acquired on 7/30/2009).
  8. They recognized an $11,000 loss on the 6/13/2018 sale of QuikCo stock (acquired on 3/20/2011).
  9. They received $500 of qualified dividends on 7/15/2018.

    After completing the required capital gains netting procedures, what will be the Jacksons’ 2018 tax liability?

Solutions

Expert Solution

ANSWER:

In order to calculate the tax liability we will first netoff all the short term capital gains and losses and long term capital gain and losses to arrive at taxable income.

Considering our case we have :

Short Term Long Term Subject to 28% Long term subject to 25% long term subject to 0/15/20% Total Netoff gain / loss

(d) 4,000

(f)-12,000

(a)   20,000

(b) -10,000

(e) 8,000

(c) -12,000

(e)    9,000

(g)    7,000

(h) -11,000

Total -8000 10,000 8,000        - 7,000 = 3,000

Total Taxable Income before events           = 200,000

Qualified dividend                                        =        500

Net Long term capital Gain subject to 25% =     3,000

Total Taxable Income after events              = 203,500

Standard deduction for married filing jointly =   12,600

Regular Taxable income after standard deduction   =  190,900 - 3,000 LTCG - 500 QD = $187,400

Income tax at 10 % tax rate ( for income from 0 to 18,450)         =    1,845.0

Income tax at 15% tax rate ( for income from 18,450 to 74,900)   =    8,467.5 for regular Income + $75 for QD(Qualified Dividend)

Income tax at 25% tax rate (for income from 74,900 to 151,200)  = 19,075.0 for regular income + 750 for LTCG(Long term capital gains)

Income tax at 28% tax rate (for income from 151,200 to 230,450)=  10,136.0

Total Income tax liability for Tax year 2018 of Jackson's is

=  $1,845 + $8,467.5 +$75 + $19,075 + $750 +   $10,136 =  $40,348.5            


Related Solutions

In 2018, Tom and Amanda Jackson (married filing jointly) have $300,000 of taxable income before considering...
In 2018, Tom and Amanda Jackson (married filing jointly) have $300,000 of taxable income before considering the following events: (Use the dividends and capital gains tax rates and tax rate schedules.) On May 12, 2018, they sold a painting (art) for $122,500 that was inherited from Grandma on July 23, 2016. The fair market value on the date of Grandma’s death was $96,250 and Grandma’s adjusted basis of the painting was $27,500. They applied a long-term capital loss carryover from...
n 2018, Tom and Amanda Jackson (married filing jointly) have $240,000 of taxable income before considering...
n 2018, Tom and Amanda Jackson (married filing jointly) have $240,000 of taxable income before considering the following events: (Use the dividends and capital gains tax rates and tax rate schedules.) On May 12, 2018, they sold a painting (art) for $115,000 that was inherited from Grandma on July 23, 2016. The fair market value on the date of Grandma’s death was $92,500 and Grandma’s adjusted basis of the painting was $26,000. They applied a long-term capital loss carryover from...
In 2020, Tom and Amanda Jackson (married filing jointly) have $300,000 of taxable income before considering...
In 2020, Tom and Amanda Jackson (married filing jointly) have $300,000 of taxable income before considering the following events: (Use the dividends and capital gains tax rates and tax rate schedules.) On May 12, 2020, they sold a painting (art) for $122,500 that was inherited from Grandma on July 23, 2018. The fair market value on the date of Grandma’s death was $96,250 and Grandma’s adjusted basis of the painting was $27,500. They applied a long-term capital loss carryover from...
In 2020, Tom and Amanda Jackson (married filing jointly) have $228,000 of taxable income before considering...
In 2020, Tom and Amanda Jackson (married filing jointly) have $228,000 of taxable income before considering the following events: (Use the dividends and capital gains tax rates and tax rate schedules.) On May 12, 2020, they sold a painting (art) for $113,500 that was inherited from Grandma on July 23, 2018. The fair market value on the date of Grandma’s death was $91,750 and Grandma’s adjusted basis of the painting was $25,700. They applied a long-term capital loss carryover from...
Tom and Betsy, who are married filing jointly, reported a standard deduction of $24,000 on their...
Tom and Betsy, who are married filing jointly, reported a standard deduction of $24,000 on their 2018 tax return. They paid $500 to the state for income taxes in 2018. In 2019, they received a $125 refund of state taxes paid in 2018. What is the amount that Tom and Betsy need to report on their 2019 tax return?
Bill and Janet are a married couple filing jointly in 2018 and have one child, Robert,...
Bill and Janet are a married couple filing jointly in 2018 and have one child, Robert, who is 9 years old. Robert has interest income of $3,000 in 2018. Bill and Janet’s taxable income in 2018 is $46,050 and they take the standard deduction as the only from AGI deduction. Click here to access the trust and estate tax rate schedule and the individual income tax schedules. Calculate Robert’s tax liability for 2018, assuming: a.  Bill and Janet do not make...
Bill and Janet are a married couple filing jointly in 2018 and have one child, Robert,...
Bill and Janet are a married couple filing jointly in 2018 and have one child, Robert, who is 9 years old. Robert has interest income of $3,000 in 2018. Bill and Janet’s taxable income in 2018 is $46,050 and they take the standard deduction as the only from AGI deduction. Click here to access the trust and estate tax rate schedule and the individual income tax schedules. Calculate Robert’s tax liability for 2018, assuming: a.  Bill and Janet do not make...
calculate the taxable amount of social security. John and Jean are married filing jointly. They had...
calculate the taxable amount of social security. John and Jean are married filing jointly. They had the following amounts of income for 2018. Taxable interest income $10,000 Non-taxable interest income $20,000 Pension income $15,000 Social security benefits $30,000
lIn Year 1, Jeff and Kim Jenson (married filing a joint return) have $200,000 of taxable...
lIn Year 1, Jeff and Kim Jenson (married filing a joint return) have $200,000 of taxable income before considering the following transactions: a. On March 2, Year 1, they sold a painting (art) for $100,000 that was purchased 15 years ago for $90,000. b. A $12,000 loss on 11/1, Year 1 sale of bonds (acquired on 5/12, 5 years ago); c. A $4,000 gain on 12/12, Year 1 sale of IBM stock (acquired on 2/5, Year 1); d. A $17,000...
In 2020, Sheryl is claimed as a dependent on her parents' tax return. Her parents report taxable income of $500,000 (married filing jointly)
In 2020, Sheryl is claimed as a dependent on her parents' tax return. Her parents report taxable income of $500,000 (married filing jointly). Sheryl did not provide more than half her own support. What is Sheryl's tax liability for the year in each of the following alternative circumstances? Use Tax Rate Schedule, Dividends and Capital Gains Tax Rates, for reference. (Leave no answer blank. Enter zero if applicable.) b. She received $6,000 of interest income from corporate bonds she received...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT