Matt and Meg Comer are married. They do not have any children. Matt works as a history professor at a local university and earns a salary of $65,000. Meg works part-time at the same university. She earns $41,000 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). What is the Comers’ tax liability for 2020 if they report the following capital gains and losses for the year?
Short-term capital gains $9,000
Short-term capital losses ($2,000)
Long-term capital gains $15,000
Long-term capital losses ($6,000)
Total Tax Liability | $ 12,334 |
Req. 1
Explanation:
Case - A | |
Salary ( $65,000 + 41,000 ) | $ 106,000 |
Net Short Term Capital Gain ( 9000 -2000) | 7000 |
Net Long Term Capital Gain (15,000-6000) | $9000 |
AGI | $122,000 |
Less: Standard Deduction | (24,800) |
Taxable Income | $97,200 |
Less: Preferentially Taxed Income | ($9000) |
Income Taxed at ordinary rates | $88,200 |
Income taxed at capital gain rates | $9000 |
Case : A
2) Income Tax at ordinary Rates:
Tax schedule:
$80,251 to $171,050= $9,235 plus 22% of the amount over $80,250 |
3) Tax Liability:
= $ 9235 + ($88,200- $ 80,250)×22%
= $ 9235 + $ 1749
= $ 10,984
4) Tax on Capital Gain:
$ 9000× 15% = $ 1350
5) Total Tax Liability:
= $ 10,984 + $ 1350 = $ 12,334
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