Question

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.)

1. 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.
2. They applied a long-term capital loss carryover from 2017 of $11,250.
3. They recognized a $12,625 loss on the 11/1/2018 sale of bonds (acquired on 5/12/2008).
4. They recognized a $4,750 gain on the 12/12/2018 sale of IBM stock (acquired on 2/5/2018).
5. They recognized a $20,000 gain on the 10/17/2018 sale of rental property (the only §1231 transaction) of which $10,000 is reportable as gain subject to the 25 percent maximum rate and the remaining $10,000 is subject to the 0/15/20 percent maximum rates (the property was acquired on 8/2/2012).
6. They recognized a $13,250 loss on the 12/20/2018 sale of bonds (acquired on 1/18/2018).
7. They recognized a $7,625 gain on the 6/27/2018 sale of BH stock (acquired on 7/30/2009).
8. They recognized an $12,250 loss on the 6/13/2018 sale of QuikCo stock (acquired on 3/20/2011).
9. They received $1,000 of qualified dividends on 7/15/2018.
   
   After completing the required capital gains netting procedures, what will be the Jacksons’ 2018 tax liability? (Do not round intermediate calculations.)

Answer 1

Short term	Long Term	Long Term	Long Term
	28%	25%	0/15/20%
d.4750	a.26250	e.10000	c.(12625)
f.(13250)	b.(11250)		e.10000
			g.7625
			h. (12250)
Total = $(8500)	Total=$15000	Total=$10000	Total=$(7250)

Short term loss = $8500

Long term loss = $7250

Long term gain = $25000

Then we will subtract short term loss and Long term loss from Long term gains

= 25000 - (8500+7250)

Long term capital gain= $9250

2018 Taxable income

TI $300000

Qual. Dividend $1000

LTCG 25% $9250

Taxable Income $310250

In the Unites States, ordinary income is taxed progressively for example

Married filing jointly

0 - 19050 = 10%

19051 - 77400 = 12%

77401 - 165000 =22% 1905+7002+19272+32400

165001 - 315000 = 24%

2018 Tax Liability

Ordinary income : $28179 + 24% (300000-165000) =  $60579

Capital Gains : +25% *$9250 = $2312.50

Dividends : +15% * $1000 = $150

Total Tax Liability    = $63041.50

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