O Lucia is a 69-year-old single individual who receives a taxable pension of $ J
ID: 2420026 • Letter: O
Question
O Lucia is a 69-year-old single individual who receives a taxable pension of $ J 0,000 per year and Social Security benefits of $7,000. Lucia is considering the possibility of selling stock she has owned for years and using the funds to purchase a summer home. She Will realize a gain of $20,000 when she sells the stock, which has been paying $1,000 of dividends each year, Lucia says her brother recommended that she sell half of the stock this year and half next year because selling all of the stock at once would affect the tax treatment of her Social Security benefits. Compute her AGI under the assumption she sells all of the stock now after receiving $1,000 dividends from the stock. Repeat the computation under the assumption she sells only half of the stock this year and also receives $1,000 dividends from the stock.Explanation / Answer
the scope of the 0% long-term capital gains tax bracket is limited – $36,900 for individuals – the availability of the 0% rate still presents significant tax planning opportunities.So in option A as total income is $28000 the 0% long term capital gain benefit will be given and so taxable income is $18000.
In option B as total income is $38000 which is greater than $36900 so in thiss case taxable income is $38000 0% tax benefit on long term capital gain will not be given
a) Amount B) Amount $ Pension 10000 10000 Social Security Benefit 7000 7000 Dividend 1000 1000 Capital gain 10000 20000 Total 28000 38000 Taxable Income 18000 38000Related Questions
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