Question

During the year, Inez, a single individual, recorded the following transactions involving capital assets. Gain on...

During the year, Inez, a single individual, recorded the following transactions involving capital assets.
Gain on the sale of unimproved land (held as an investment for 3 years) $ 3,000 Loss on the sale of a camper (purchased 2 years ago and used for family vacations) (5,000) Gain on the sale of ADM stock (purchased 9 months ago as an investment) 4,000 Gain on the sale of a fishing boat and trailer (acquired 18 months ago at an auction and used for recreational purposes) 1,000

a. If Inez has taxable income of $158,000, how much income tax results?

b. If Inez has taxable income of $35,000, how much income tax results?

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Answer #1
Gain on the sale of unimproved land Long term capital gain
Loss on the sale of a camper Not deductible
Gain on the sale of ADM stock Short term capital gain
Gain on the sale of a fishing boat and trailer Long term capital gain.
Overall, Inez has Long term capital gain of  $4,000 and   Short term capital gain of $4,000

a. If Inez has taxable income of $158,000, long term capital gain tax rate is 15% and short term capital gain tax rate is 24%.

Income tax = ($4,000 * 15%) + ($4,000 * 24%) = $600 + $960 = $1,560

b.  If Inez has taxable income of $35,000, long term capital gain tax rate is 0% and short term capital gain tax rate is 12%.

Income tax = ($4,000 * 0%) + ($4,000 * 12%) = $480

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