Question

Matt and Meg Comer are married and file a joint tax return. They do not have any children. Matt works as a history professor at a local university and earns a salary of $68,400. Meg works part time at the same university. She earns $33,400 a year. The couple does not itemize deductions. Other than salary, the Comers’ only other source of income is from the disposition of various capital assets (mostly stocks). (Use the tax rate schedules,Dividends and Capital Gains Tax Rates.) (Round your final answers to the nearest whole dollar amount.)

b. What is the Comers’ tax liability for 2020 if they report the following capital gains and losses for the year?

Short-term capital gains	$	1,500
Short-term capital losses		0
Long-term capital gains		13,400
Long-term capital losses		(10,400)

Answer 1

All amounts are in $

Taxpayer = Married and Jointly Filing

Tax year = 2020

Salary (68,400 + 33,400) = 101,800

Long term Capital gain = 3,000

Short term Capital gain = 1,500

AGI = 106,300

Standard deduction = 24,800

Taxable Income = 81,500

From this income 3,000 is taxed at 15% rate and the remaining income is taxed at Ordinary rates

Tax on long term capital gain = 3,000 x 15% = 450

Tax on ordinary income plus short term capital gain :

Ordinary income = 81,300 - 3,000 = 78,300

Tax on ordinary income = 19,750 x 10% + (78,300-19,750) x 12%

= 9,001

Total Tax liability = 9,451 (9,001+ 450)