Question

Sandra, a single taxpayer with a marginal tax rate of 35 percent, sold the following assets during the year:

Asset	Sale Price		Tax Basis			Gain/Loss			Holding Period
XOM Stock	$	50,000	$	60,000		$	(10,000	)	More than 1 Year
GTE Stock	$	12,000	$	6,000		$	6,000		Less than 1 Year
Coin Collection	$	20,000	$	5,000		$	15,000		More than 1 Year
Bank Stock	$	11,000	$	19,000		$	(8,000	)	Less than 1 Year
Rental Home	$	125,000	$	50,000		$	75,000	*	More than 1 Year

*$30,000 of the gain is §1250 recapture. The remaining gain is 0/15/20 percent gain. What are Sandra’s recognized gains/losses for the year and what tax rate(s) will apply to those gains/losses?

Answer 1

Short term capital gain / (loss) of Sandra
Stocks	Amount ($)
GTE stock	6000
Bank stock	(8000)
Short term capital loss		(2000)

Short term capital loss shall be carried forward to be set off against future short term capital gain only. The short term capital gain is taxed at the ordinary income tax rate applicable to a tax payer. Thus, in case of Sandra any short term capital gain of her shall be taxed at the rate of 35% since she belongs to 35% tax bracket.

Long term capital gain / loss of Sandra
Stocks	Amount ($)	Amount ($)
XOM Stock	-10000
Coin collection	15000
Rental home	75000
Net long term capital gain		80000
Long term capital gain shall be taxed @15% as Sandra is in 35% tax bracket (80000 x 15%)		12000

The long term capital gain is taxed at the rate 15% for the tax payers that belong to the 35% tax bracket accordingly, since Sandra is in 35% tax bracket hence, the long term capital gain of her shall be taxed at 15%.