In: Accounting
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 $20,000 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2020 assuming they file a joint return? (Round all your immediate computations to the nearest whole dollar amount)
Name:Ron Spouse name:Anne Filing status:married filing jointly Tax year :2020
A long term capital asset is an asset held for more than a year,on the other hand short term
capital asset is an asset hel for an year or less than a year.
Calculation of long term capital gain
Asset Market value($) 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