Question

During the current year, Ron and Anne sold the following assets: (Use the dividends and capital gains tax rates and tax 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

a. Given that Ron and Anne have a taxable income of only $20,000 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2020 assuming they file a joint return? (Round all your immediate computations to the nearest whole dollar amount)

Answer 1

Name:Ron Spouse name:Anne Filing status:married filing jointly Tax year :2020

A long term capital asset is an asset held for more than a year,on the other hand short term

capital asset is an asset hel for an year or less than a year.

Calculation of long term capital gain

Asset Market value($) Tax basis($) Long term capital gain($)

L stock 50000 41000 9000

M stock 28000 39000 (11000)

Antiques 7000 4000 3000

Rental Home 300000 60000(90000-30000) 240000

Net long term capital gain = $241000

.

Calculation of short term capital gain

Asset Market value($) Tax basis($) Short term capital gain($)

N stock 30000 22000 8000

O stock 26000 33000 (7000)

Net short term capital gain = 1000

Tax calculations

*Long term capital gain upto $80000 @10% and $80000 to $496600 @ 15%

(as per tax rate schedule )

in this case long term capital gain is $ 241000 upto $80000@ 10% = $8000

241000-80000 =    $161000@15% = $24150

Total = $32150

* Short term capital gain = $1000

Ordinary income = $20000

Total = $21000

Less: standard deduction = $21000

(subject to a maximum of $24400)

AGI = $0

Total tax on long term capital gain = $32150

Tax on other income = $0

Total tax due=$32150