Question

Capital Gain and Loss Treatment

Part 1. Use the provided Excel spreadsheet for the Critical Thinking assignment for this week. On Worksheet 1, Assume the there are no capital loss carryforwards in each of the independent situations presented. You are to:

Calculate AGI that includes the property transactions

Determine the amount and character (short-term or long-term) of any carryforward (if any)

Part 2. On Worksheet 2, compute the tax liability given each independent situation presented. Review Concept Summary 14.4 on page 14-26 for applicable tax rates. Also review the netting process on pages 14-21 through 14-26 of the text.

Requirements:
Clearly identify the requirements being addressed. Show all calculations within the cells of an Excel spreadsheet. This means that you must use formulas and links so that the thought process can be examined. Make good use of comments to convey your thought process as well. No hard coding of solutions. Submit a single MS Excel file for grading.

	Each scenario listed below is independent	Part 1	Part 2
a	The taxpayer has W-2 income of $50,000 and sold stock purchased 6 months ago for $5,000. The shares were purchased for $500
b	The taxpayer has W-2 income of $50,000 and sold stock purchased 3 years ago for $5,000. The shares were purchased for $50
c	The taxpayer has W-2 income of $50,000 and sold personal residence purchased 3 years ago for $400,000. The home was purchased for $100,000 (with no other basis adjustments).
d	The taxpayer has W-2 income of $50,000 and sold personal residence purchased 3 years ago for $400,000. The home was purchased for $300,000 (with no other basis adjustments).
e	The taxpayer has W-2 income of $50,000 and sold stock purchased 3 years ago for $5,000. The shares were purchased for $5000
f	The taxpayer has W-2 income of $50,000 and sold stock purchased 3 months ago for $5,000. The shares were purchased for $500
g	The taxpayer has W-2 income of $50,000. The taxpayer made a loan (with a written agreement) to a friend for $2,000. The friend filed for bankruptcy and will not be repaying the loan
h	The taxpayer has W-2 income of $50,000. The taxpayer made a loan (with a written agreement) to a friend for $5,000. The friend filed for bankruptcy and will not be repaying the loan

Answer 1

	Each scenario listed below is independent	Part 1	Part 2
a	The taxpayer has W-2 income of $50,000 and sold stock purchased 6 months ago for $5,000. The shares were purchased for $500	AGI= $50,000+ $5,000 - $500 = $54,500	Short term gain of $4,500 is realized
b	The taxpayer has W-2 income of $50,000 and sold stock purchased 3 years ago for $5,000. The shares were purchased for $50	AGI= $50,000+ $5,000 - $50 = $54,950	Long term Capital gain of $5,950
c	The taxpayer has W-2 income of $50,000 and sold personal residence purchased 3 years ago for $400,000. The home was purchased for $100,000 (with no other basis adjustments).	AGI = $50,000 + $50,000 = $ $100,000	Long term gain of $300,000
d	The taxpayer has W-2 income of $50,000 and sold personal residence purchased 3 years ago for $400,000. The home was purchased for $300,000 (with no other basis adjustments).	AGI=$50,000	long term gain of $100,000
e	The taxpayer has W-2 income of $50,000 and sold stock purchased 3 years ago for $5,000. The shares were purchased for $5000	AGI = $50,000	no gain was realized
f	The taxpayer has W-2 income of $50,000 and sold stock purchased 3 months ago for $5,000. The shares were purchased for $500	AGI=$50,000 + $4,500 =$54,500	Short term gain of $4,500
g	The taxpayer has W-2 income of $50,000. The taxpayer made a loan (with a written agreement) to a friend for $2,000. The friend filed for bankruptcy and will not be repaying the loan	AGI=$50,000-$2,000=$48,000	short capital loss of $2,000
h	The taxpayer has W-2 income of $50,000. The taxpayer made a loan (with a written agreement) to a friend for $5,000. The friend filed for bankruptcy and will not be repaying the loan	AGI=$50,000 - $3,000 = $47,000	short Capital loss of $3,000