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In: Accounting

Mr. and Mrs. Sedlock file a joint return and have a taxable income of $370,000 without...

Mr. and Mrs. Sedlock file a joint return and have a taxable income of $370,000 without considering the following information below. Determine the increase in their tax liability for the following independent fact situations.

a. They have a STCG of $20,000 and a LTCL of $12,000.

b. They have a LTCG of $30,000 due to the sale of a collectible and a LTCG of $9,000 due to the sale of General Motors stock.

c. Same as part b except they also have a STCL of $4,400.

Solutions

Expert Solution

case a:

taxable income    $3,70,000

STCG                                                   $ 20,000

Total taxable income                              $ 3,90,000

As LTCL will not be set off from the STCG or taxable income and it should be carried forward to next year and the tax liability will be on $ 3,90,000

case b:

Taxable income                                      $ 3,70,000

STCG                                                    $ 30,000

LTCG                                                     $ 12,000

total taxable income                             $ 4,12,000

as there is short term capital gain and long term gain so it will include in taxable income and tax liability will increase and the tax has to be paid on $ 4,12,000

case c:

taxable income                                      $ 3,70,000

LTCG              $ 9,000

STCL             ($ 4,400)                          $ 4,600

Total taxable income                          $ 3,74,600

as STCL can be set off against LTCG so it is set off from LTCG and the tax liability will increase and tax to be paid on $ 3,74,600.

ekkarill92 answered 10 months ago
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