Question

Bill had the following gains and losses on asset sales: $500 gain on stock held 11 months; a $2,300 gain on land held two years; $1,900 loss on gold coins held two years; $1,200 gain on antique toys held three years; and a $1,300 loss on investment land held six months. Determine Bill’s (A) net capital gain or loss, (B) the capital gains rate that applies to each asset sale, (C) the capital gain rate(s) that would apply to the final net capital gain, and (D) Bill’s taxable income and income tax assuming Bill is married, has no dependents, files a joint return with his wife using the standard deductions, and their only income is Bill’s salary of $240,000.

Answer 1

1) $500 gain on stock held 11 months	STCG
2) a $2,300 gain on land held two years	LTCG
3) $1,900 loss on gold coins held two years	LTCL
4) $1,200 gain on antique toys held three years	LTCG
5) a $1,300 loss on investment land held six months	STCL
Netting of short-term and long-term gains and losses:
Net Short Term Capital Loss = $500 - $1300	-800
Net Long Term Capital Gain = $2300 +$1200 - $1900	1600
Net long term Capital Gain	800
The $800 net long-term capital gain increases her taxable income by $800. In determining her income tax liability, bill's 15% rate gain is 800 x 15% = $120
B ) & c)
15% capital gains rate that applies to each asset sale and the final net capital gain
d)
Gross Salary	2,40,000
Add: Capital Gain	800
Less:Standard Deduction	-24000
Taxable Income	2,16,800
Tax Liability
Regular Tax on ($216,800- $800 L/T Capital Gain)	2,16,000
Regular Tax = 28179 + (216000 - 165000) x 24%	$ 40,419.00
15% tax on long term capital gain (15% x $800)	120
Medicare surtax = ($216,800 - $200,000 )x 3.8%	638.4
Total tax Liability	$ 41,177.40