tax forms 63. During 2018, your clicnts, Mt. and Mrs. Howell, owned the followin
ID: 2428492 • Letter: T
Question
tax forms 63. During 2018, your clicnts, Mt. and Mrs. Howell, owned the following investment asscts: Broker's Commission Paid at Time of Purchase $ 100 Investment Assets 300 shares of IBM common 200 shares of IBM common 3,000 shares of Apple preferred 2,100 shares of Cisco common 420 shares of Vanguard mutual fund Date Acquired 11/22/2015 4/3/2016 12/12/2016 8/14/2017 3/2/2018 Purchase Price $ 10,350 43,250 147,000 52,500 14,700 300 1,300 550 "No commissions are charged when no-load mutual funds are bought and sold. Because of the downturn in the stock market, Mr. and Mrs. Howell decided to sell most of their stocks and the mutual fund in 2018 and to reinvest in municipal bonds. The following investment assets were sold in 2018 Investment Assets 300 shares of IBM common 3,000 shares of Apple preferred 2,100 shares of Cisco common 451 shares of Vanguard mutual fund Broker's Commissior Paid at Time of Sale S 100 Date Sold 5/6 10/5 8/15 12/21 Sale Price $ 13,700 221,400 63,250 15,700 2,000 650 No-load fund* "No oon misssons are charged when ?0-load mutual funds are bought and told. The Howells' broker issued them a Form 1099-B showing the sales proceeds net of the commissions paid. For example, the IBM sales proceeds were reported aa $13,600 on the Form 1099-B they received. In addition to the sales reflected in the table above, the Howells provided you with the following additional information concerning 2018 The Howells received a Form 1099-B from the Vanguard mutual fund reporting a $900 long-term capital gain distribution. This distribution was reinvested in 31 additional Vanguard mutual fund shares on 6/30/2018. . In 2013, Mrs. Howell loaned $6,000 to a friend who was starting a new multilevel Page 7-42 marketing company called LD3. The friend declared bankruptcy in 2018, and Mrs. Howell has been notificd she will not be receiving any repayment of the loan. . The Howells have a $2,300 short-term capital loss carryover and a S4,800 long-tcrm capital loss carryover from prior years . The Howells did not instruct their broker to sell any particular lot of IBM stock. . The Howells carned $3,000 in municipal bond intcrest, $3,000 in interest from corporate bonds, and 54,000 in qualified dividenda Assume the Howells have $130,000 of wage income during the ycar a. Go to the IRS website (www.irs.gov Q) and downiload the most current version of Form 8949 and Schedule D. Use Form 8949 and page 1 of Schedule D to compute net long-term and short-term capital gains. Then, compute the Howells' tax liability for the ycar (ignoring the altcrnative minimum tax and any phase-out provisions) assuming they file a joint return, they have no dependents, they don't make any special tax clections, and their itemized deductions total $25,000. Assume that assct bases are reported to the IRS s.Explanation / Answer
Answer a)
Form 8949 with schedule D
For Short Term Profit/loss
Adjustment, if any, to gain or loss. If you enter an amount in column (g), enter a code in column (f). See the separate instructions.
(a) Description of property (Example: 100 sh. XYZ Co.)
Date acquired (Mo., day, yr.)
(c) Date sold or disposed of (Mo., day, yr.)
(d) Proceeds (sales price) (see instructions)
(e) Cost or other basis. See the Note below and see Column (e) in the separate instructions
(f) Code(s) from instructions
Amount of adjustment
(h) Gain or (loss). Subtract column (e) from column (d) and combine the result with column (g)
451 Shares of vangaurd mf
3/2/2016
12/21/2016
15700
14700
1000
total
15700
14700
1000
For Long Term Profit/loss
Adjustment, if any, to gain or loss. If you enter an amount in column (g), enter a code in column (f). See the separate instructions.
(a) Description of property (Example: 100 sh. XYZ Co.)
Date acquired (Mo., day, yr.)
(c) Date sold or disposed of (Mo., day, yr.)
(d) Proceeds (sales price) (see instructions)
(e) Cost or other basis. See the Note below and see Column (e) in the separate
instructions
(f) Code(s) from instructions
Amount of adjustment
(h) Gain or (loss). Subtract column (e) from column (d) and combine the result with column (g)
300 Shares of IBM
11/22/2013
05/06/2016
13600
10450
3150
3000 Shares of Apple preferred
12/12/2014
10/05/2016
219400
148300
71100
2100 Shares of Casco
8/14/2015
8/15/2016
62600
51950
10650
total
295600
210700
84900
Answer (b)
Wages
130000
Interest
6000
3000
Qualifying dividend
4000
0
Short term capital gain
1000
Short term capital gain bought forward
(2,300)
0
Long term capital Gain
84900
Long term capital Gain distribution
900
Long term capital gain bought forward
(4,800)
Other loss
(6,000)
75,000
AGI
208,000
Less Itimized deductions
25000
Taxable Income
183,000
We recommended that he should hold the shares of Apple preferred till next year.
Therefore, His taxable income go down and save the tax.
Answer (c)
Wages
130000
Interest
6000
3000
Qualifying dividend
4000
0
Short term capital gain
1000
Short term capital gain bought forward
(82,300)
0
Long term capital Gain
84900
Long term capital Gain distribution
900
Long term capital gain bought forward
(4,800)
Other loss
(6,000)
75,000
AGI
208,000
Less Itimized deductions
25000
Taxable Income
183,000
In this case we carry $ 81300 loss to next year.
Answer a)
Form 8949 with schedule D
For Short Term Profit/loss
Adjustment, if any, to gain or loss. If you enter an amount in column (g), enter a code in column (f). See the separate instructions.
(a) Description of property (Example: 100 sh. XYZ Co.)
Date acquired (Mo., day, yr.)
(c) Date sold or disposed of (Mo., day, yr.)
(d) Proceeds (sales price) (see instructions)
(e) Cost or other basis. See the Note below and see Column (e) in the separate instructions
(f) Code(s) from instructions
Amount of adjustment
(h) Gain or (loss). Subtract column (e) from column (d) and combine the result with column (g)
451 Shares of vangaurd mf
3/2/2016
12/21/2016
15700
14700
1000
total
15700
14700
1000
For Long Term Profit/loss
Adjustment, if any, to gain or loss. If you enter an amount in column (g), enter a code in column (f). See the separate instructions.
(a) Description of property (Example: 100 sh. XYZ Co.)
Date acquired (Mo., day, yr.)
(c) Date sold or disposed of (Mo., day, yr.)
(d) Proceeds (sales price) (see instructions)
(e) Cost or other basis. See the Note below and see Column (e) in the separate
instructions
(f) Code(s) from instructions
Amount of adjustment
(h) Gain or (loss). Subtract column (e) from column (d) and combine the result with column (g)
300 Shares of IBM
11/22/2013
05/06/2016
13600
10450
3150
3000 Shares of Apple preferred
12/12/2014
10/05/2016
219400
148300
71100
2100 Shares of Casco
8/14/2015
8/15/2016
62600
51950
10650
total
295600
210700
84900
Answer (b)
Wages
130000
Interest
6000
3000
Qualifying dividend
4000
0
Short term capital gain
1000
Short term capital gain bought forward
(2,300)
0
Long term capital Gain
84900
Long term capital Gain distribution
900
Long term capital gain bought forward
(4,800)
Other loss
(6,000)
75,000
AGI
208,000
Less Itimized deductions
25000
Taxable Income
183,000
We recommended that he should hold the shares of Apple preferred till next year.
Therefore, His taxable income go down and save the tax.
Answer (c)
Wages
130000
Interest
6000
3000
Qualifying dividend
4000
0
Short term capital gain
1000
Short term capital gain bought forward
(82,300)
0
Long term capital Gain
84900
Long term capital Gain distribution
900
Long term capital gain bought forward
(4,800)
Other loss
(6,000)
75,000
AGI
208,000
Less Itimized deductions
25000
Taxable Income
183,000
In this case we carry $ 81300 loss to next year.
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