Lilia an investor purchased an art painting 5 years ago for 50000. in 2017 she sold the painting for 500000. how much federal tax must she pay on the sale?
Step 1: Here, the asset is held for more than a year so it's considered to be long term.
Step 2: Even if you are in the high tax bracket you ought to pay 28% on gain on the sale of collectible while the low tax bracket investors will gain over the rate of tax and hit an extra.
Step 3: Broker fee, Auction fee, Maintenance or any repairs to the asset, Restoration costs and Cost of the item form the basis for the calculation of the gain of the art. These are added and later the sale value is deducted from it and then the tax rate are induced on the remaining amount.
Step 4: So the capital gain is 500000 - 50000 = 450000.
Step 5: The tax rate is 28% induced on 450000 which gets to be 126000.
Additional information: The tax rate for short term capital gain will be based on the ordinary income tax rate bracketed people as induced on the stocks and bonds of 35% and here this will not be the case as the collectible is held for more than a year.
Get Answers For Free
Most questions answered within 1 hours.