Question

Henrich is a single taxpayer. In 2018, his taxable income is $458,500. What is his income tax and net investment income tax liability in each of the following alternative scenarios? Use Tax Rate Schedule, Dividends and Capital Gains Tax Rates, Estates and Trusts for reference. (Do not round intermediate calculations. Round your answer to 2 decimal places. Leave no answer blank. Enter zero if applicable.)

b. His $458,500 of taxable income includes $2,000 of long-term capital gain that is taxed at preferential rates.

c. His $458,500 of taxable income includes $56,000 of long-term capital gain that is taxed at preferential rates.

d. Henrich has $199,250 of taxable income, which includes $51,700 of long-term capital gain that is taxed at preferential rates. Assume his modified AGI is $210,000.

I just need the Income Tax.

Answer 1

Part B:

	Description	Amount	Explanation
1	Taxable income	458500
2	Preferentially taxed income	2000
3	Income taxed at ordinary rates	456500	(1) – (2)
4	Tax on income taxed at ordinary rates	135465	45689.50+(35%*(456500-200000)) (see tax rate schedule for Single individuals)
5	Tax on preferentially taxed income	400	(2) ×20% As taxable income is above 425800
6	Income tax	135865	(4) + (5)
7	Net investment tax	76	Since Henrich’s modified AGI exceeds $200,000, the entire $2,000 long-term capital gain is subject to the 3.8% net investment income tax ($2,000 x 3.8% = $76)
	Total income & net investment income tax	135941	(6) + (7)

Part C

	Description	Amount	Explanation
1	Taxable income	458500
2	Preferentially taxed income	56000
3	Income taxed at ordinary rates	402500	(1) – (2)
4	Tax on income taxed at ordinary rates	116565	45689.50+(35%*(402500-200000)) (see tax rate schedule for Single individuals)
5	Tax on preferentially taxed income	10035	Of 56000, 23300 will be taxed at 15% and remaining 32700 will be taxed at 20%
6	Income tax	$126600	(4) + (5)
7	Net investment tax	2128	Since Henrich’s modified AGI exceeds $200,000, the entire $56000 long-term capital gain is subject to the 3.8% net investment income tax ($56000 x 3.8% = $76)
	Total income & net investment income tax	$128728	(6) + (7)

Part D

	Description	Amount	Explanation
1	Taxable income	199250
2	Preferentially taxed income	51700
3	Income taxed at ordinary rates	147550	(1) – (2)
4	Tax on income taxed at ordinary rates	29702	14089.50+(24%*(147550-82500)) (see tax rate schedule for Single individuals)
5	Tax on preferentially taxed income	7755	(2) ×15% As taxable income is below 425800
6	Income tax	$37457	(4) + (5)
7	Net investment tax	380	3.8% x the lesser of (a) $51700 of net investment income or (b) ($210,000 modified AGI less $200,000 threshold) = 3.8% x $10,000 = $380
	Total income & net investment income tax	$37837	(6) + (7)