Question

Jim and Mary Reynolds, married, reported the following during the current year:

      Salary – Mary                                                                                                   $135,000

      Interest on State of Michigan bonds held by Mary                                                    150

      Interest on Ford Motor Company bonds held by Jim                                                350

Dividend on General Motors stock held by Mary (qualified)                              700

Their investment transactions this year included the following:

a.   Sold 30 shares of General Electric stock held jointly on November 30^th for $2,600. They purchased the shares on February 28^th of this year for $3,000. They paid a stockbroker commission of $200 on the sale of the stock.

b. Sold 10 shares of MicroTech stock held jointly on June 15^th for $14,500. They purchased the stock on September 18, 2008, for $4,050. They paid a stockbroker commission of $150 to purchase the stock in 2008.

1.    The Reynold’s net short-term capital gain/loss is:

1. ($200).
2. ($400).
3. ($600).
4. none of the above.

2.    The Reynold’s net long-term capital gain/loss is:

1. $10,300.
2. $10,450.
3. $10,600.
4. none of the above.

3.    Ignore your answers for questions 1 and 2 and assume the Reynold’s net short-term capital loss is ($800) and their net long-term capital gain is $3,000 from the sale of their General Electric and Micro Tech stock. Also considering their other income listed above, the Reynold’s adjusted gross income would now be:

1. $137,550.
2. $138,250.
3. $138,400.
4. $139,050.
5. none of the above.

4.    Ignore your answers for questions 1, 2, and 3 and assume the Reynold’s net short-term capital gain is $2,000 and their net long-term capital gain is $4,000 from the sale of their General Electric and Micro Tech stock. Also considering their other income listed above, the total amount of their taxable income that would be subject to the preferential tax rate of 0/15/20% now is:

      a.    $4,000.

      b.    $4,700.

      c.    $5,070.

      d.    $6,700.

e.         none of the above.

Answer 1

1	Net Short term Capital Loss	$        600
	3000+200-2600
2	Net Long term Capital Gain	$   10,300
	14500-(4050+150)
3	Salary – Mary	$ 135,000
	Interest on Ford Motor Company bonds	$        350
	Dividend on General Motors stock	$        700
	Net Long term Capital Gain	$     3,000
	Net Short term Capital Loss	$       (800)
	AGI	$ 138,250
4	Net Long term Capital Gain	$     4,000
	Dividend on General Motors stock	$        700
	Taxed at Preferential Rate	$     4,700