Question

Henrich is a single taxpayer. In 2019, his taxable income is $457,500. What is his income tax and net investment income tax liability in each of the following alternative scenarios? Use Tax Rate Schedule, Dividends and Capital Gains Tax Rates, Estates and Trusts for reference. (Do not round intermediate calculations. Round your answers to 2 decimal places. Leave no answer blank. Enter zero if applicable.) rev: 02_29_2020_QC_CS-202942 c. His $457,500 of taxable income includes $54,000 of long-term capital gain that is taxed at preferential rates.

Answer 1

Solution:

Particular	Amount($)
Taxable Income (A)	457,500
Capital Gain i.e. preferential income(B)	54,000
Taxable Income at an ordinary rate C = (A-B)	403,500
Standard Deduction (D)	12,200
Taxable income (C-D)	391300
Tax on ordinary income (Working Note) (E)	$112148.5
Tax on preferential income ie. ($54000 @15%) (F)	$8100
Total income tax (E+F)	$120248.5
Net investment income tax i.e. [email protected]%	$2052

Working Note: Tax on ordinary income

Up to $9700 @10%	$970
($9700 to $39475) @12%	$3573
($39475 to $84200) @22%	$9839.5
($84200 to $160725) @24%	$18366
($160725 to $204100) @32%	$13880
($204100 to $ 391300) @ 35%	$65520
Total Tax	$112,148