Question

During the current year, Ron and Anne sold the following assets: (Use thetax rate schedules.)

Capital Asset	Market Value		Tax Basis		Holding Period
L stock	$	50,000	$	41,000	> 1 year
M stock		28,000		39,000	> 1 year
N stock		30,000		22,000	< 1 year
O stock		26,000		33,000	< 1 year
Antiques		7,000		4,000	> 1 year
Rental home		300,000*		90,000	> 1 year

*$30,000 of the gain is 25 percent gain (from accumulated depreciation on the property).

Ignore the Net Investment Income Tax.

b. Given that Ron and Anne have taxable income of $400,000 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2017 assuming they file a joint return? (Round all your intermediate computations to the nearest whole dollar amount.)

Answer 1

By using the 2017,tax schedules,the gross tax liability for ron and anne is computed as below:-

Amount and type of income	Rate	Tax	Explanation
$18650 ordinary	10%	$1865	the first $18650 is taxed at 10%
$57249 ordinary	15%	$8587	the neaxt $57249(75900-18651) taxed at 15%
$77199 ordinary	25%	$19300	the next $77199 (153100-75901) taxzed at 25%
$80249 ordinary	28%	$22470	the next $80249(233350-153101) taxed at 28%
$166649 ordinary	33%	$54994	the next $166649(400000-233351) taxed at 33%
$1000 ordinary	33%	$330	point 1 below
$211000 capital gain	15%	$31650	point 2 below
Total Tax Liability	-	$139196	-

Calculation Of Capital Gains:-

Capital Assets	Market Value	Tax Base	Capital Gain	Type
L Stock	$50000	$41000	$9000	Long Term
M Stock	$28000	$39000	-$11000	Long Term
N Stock	$30000	$22000	$8000	Short Term
O Stock	$26000	$33000	-$7000	Short Term
Antiques	$7000	$4000	$3000	Long Term
Rental Home	$300000	$90000	$210000	Long Term