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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 | $ | 50,000 | $ | 41,000 | > 1 year |
| M stock | 28,000 | 39,000 | > 1 year | ||
| N stock | 30,000 | 22,000 | < 1 year | ||
| O stock | 26,000 | 33,000 | < 1 year | ||
| Antiques | 7,000 | 4,000 | > 1 year | ||
| Rental home | 300,000* | 90,000 | > 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 $20,000 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2019 assuming they file a joint return? (Round all your intermediate computations to the nearest whole dollar amount.)
b. Given that Ron and Anne have taxable income
of $400,000 (all ordinary) before considering the tax effect of
their asset sales, what is their gross tax liability for 2019
assuming they file a joint return? (Round all your
intermediate computations to the nearest whole dollar
amount.)
a. Standard deductions have been ignored .
| Capital Asset | Market value | Tax basis | Holding Period | Long term capital gain/(loss) | Short term capital gain/(loss) | Long term capital gain Tax rate |
| L stock | 50,000 | 41,000 | > 1 year | 9,000 | 15% | |
| M stock | 28,000 | 39,000 | > 1 year | -11,000 | 15% | |
| N stock | 30,000 | 22,000 | < 1 year | 8,000 | ||
| O stock | 26,000 | 33,000 | < 1 year | -7,000 | ||
| Antiques | 7,000 | 4,000 | > 1 year | 3,000 | 28% | |
| Rental home (Excluding gain of 30000) | 3,00,000 | 90,000 | > 1 year | 1,80,000 | 15% | |
| Rental home @ 25% | 30000 | 25% | ||||
| Net Gain/(Loss) | 2,11,000 | 1,000 |
| Computation of Tax liability | |||
| Income | Tax | Remarks | |
| Long term capital gain @ 15% | 1,78,000 | 26700.00 | |
| Long term capital gain @ 28% | 3,000 | 840.00 | |
| Long term capital gain @ 25% | 30000 | 7500.00 | |
| Ordinary income (including short term gain)= (20000+1000) | 21000 | 2132.00 | 19400*10%+(B34-19400)*12% |
| Gross Tax Liability | 37172.00 |
b.
| Computation of Tax liability | |||
| Income | Tax | Remarks | |
| Long term capital gain @ 20% | 1,78,000 | 35600.00 | |
| Long term capital gain @ 28% | 3,000 | 840.00 | |
| Long term capital gain @ 25% | 30000 | 7500.00 | |
| Ordinary income (including short term gain)= (400000+1000) | 401000 | 90952.1 | 19400*0.1+(78950-19401)*0.12+(168400-78951)*0.22+(321450-168401)*0.24+(401000-321451)*0.32 |
| Gross Tax Liability | 134892.10 |
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