Question

During the current year, Ron and Anne sold the following assets: (Use the dividends and capital gains tax rates and tax rate schedules.) Capital Asset Market Value Tax Basis Holding Period L stock $ 50,800 $ 41,400 > 1 year M stock 28,800 39,400 > 1 year N stock 30,800 22,400 < 1 year O stock 26,800 33,400 < 1 year Antiques 7,800 4,400 > 1 year Rental home 300,800* 90,400 > 1 year *$30,000 of the gain is 25 percent gain (from accumulated depreciation on the property). Ignore the Net Investment Income Tax

a. Given that Ron and Anne have taxable income of only $20,800 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2018 assuming they file a joint return? (Round all your intermediate computations to the nearest whole dollar amount.)

Answer 1

Solution:

Capital Asset	Market Value	Tax Basis	Nature of Capital Asset	Difference
L Stock	50,800	41,400	Long Term	9,400
M Stock	28,800	39,400	Long Term	-10,600
N Stock	30,800	22,400	Short Term	8,400
O Stock	26,800	33,400	Short Term	-6,600
Antiques	7,800	4,400	Long Term	3,400
Rental Income	300,800	90,400	Long Term	210,400

Gross Income = 214,400
(+) Taxable Income (ordinary) = 20,800
(-) Standard deduction = (24,000)
(as per 2018 provisions)
Taxable Income =211,200
Tax on first 18,650 @10% = 1,865
Tax on Next 18,650 - 75,900 @15% = 8,588
Tax on Next 75,901 - 153,100 @25% = 19,300
Tax on 153,101 - 211,200 @28% = 16,268
Total Tax liability = 46,021
Gross tax liability =46,021

Note: As per new provisions standard deduction for filling joint return has been increased from $12,700 to $24,000