Question

Matt and Meg Comer are married. They do not have any children. Matt works as a history professor at a local university and earns a salary of $64,000. Meg works part-time at the same university. She earns $21,000 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). Assume they file a joint return. (Use the tax rate schedules.) (Round final answers to the nearest whole dollar amount.)

a. What is the Comers’ tax liability for 2017 if they report the following capital gains and losses for the year?

Short-term capital gains	$	9,000
Short-term capital losses		(2,000	)
Long-term capital gains		15,000
Long-term capital losses		(6,000	)

Answer 1

	Salary of Matt	$    64,000.00
	Salary of Meg	$    21,000.00
	Net of short term capital gain=($9000-$2000)	$      7,000.00
	Net of long term capital gain=($15000-$6000)	$      9,000.00
	Annual Gross Income	$ 101,000.00
	Less: Standard Deduction	$ (12,700.00)
	Less: Personal Exemption=($4050*2)	$    (8,100.00)
	Taxable Income	$    80,200.00
	Less: Prefentially Taxed Income=(Long term Gain)	$    (9,000.00)
	Income taxed at ordinary rates	$    71,200.00
	Income tax on ordinary income=($1865+($71200-$18650)*15%)	$      9,747.50
	Income tax on Long Term capital gain=($9000*0%)	$                   -
	Total Tax Liability	$      9,747.50
	Note: Short term capital gain should be taxed as ordinary income but tax rate on long term capital gain should be depend upon margin tax rate i.e in this case is 15%
	Marginal Tax rate	Long Term Capital gain tax rate
	10%	0
	15%	0
	If Taxable Income is between ($18651-$75900)	$1865+15% of amount in excess of $18650