Question

Ryan is in the highest marginal rate bracket has the following capital gains and losses for 2019: $6,000 STCL, $5,000 long-term collectibles gain, $2,000 unrecaptured 1250 gain, and $6,000 regular long term capital gain. Which of the following is correct:

Group of answer choices

a. The net capital gain is composed of $1,000 25% gain and $6,000 20% gain.

b. The net capital gain is composed of $5,000 28% gain and $2,000 20% gain.

c. The net capital gain is composed of $3,000 28% gain, $2,000 25% gain, and $2,000 20% gain.

d. The net capital gain is composed of $1,000 28% gain and $6,000 20% gain.

e. None of the above.

Answer 1

Option A is correct
a. The net capital gain is composed of $1,000 25% gain and $6,000 20% gain.
First the STCL of $6000 will be set off against long term collectible gain of $5000
We will first set off from it as these gains are maximum charged at 28%. Than remaining $1000
will be set off from unrecaptured 1250 gain which is maximum taxed at 25%
so remaing left is $1000 unrecapture 1250 gain and regular long tem gain of $6000
taxed 0/15/20% depending on income. In this case as in highest marginal tax rate bracket hence 20% will be used
for regular long term capital gain`
If any doubt please comment