For 2015, Wilma has properly determined that her taxable income is $36,000, incl
ID: 2456764 • Letter: F
Question
For 2015, Wilma has properly determined that her taxable income is $36,000, including $3,000 of unrecaptured § 1250 gain and $8,200 of 0%/15%/20% gain. Wilma qualifies for head-of-household filing status.
a. Are both the $3,000 of unrecaptured § 1250 gain and $8,200 of 0%/15%/20% gain subject to the alternative tax computation?
yes or no ?
b. Compute Wilma's tax liability and tax savings from the alternative tax on net capital gain.
Round your answers to the nearest dollar.
Wilma's tax liability is ? , and the tax saving from the alternative tax computation is ?
Explanation / Answer
Answer
a. Are both the $3,000 of unrecaptured § 1250 gain and $8,200 of 0%/15%/20% gain subject to the alternative tax computation?
Yes
b. Compute Wilma's tax liability and tax savings from the alternative tax on net capital gain.
Wilma has $24,800 of ordinary taxable income [$36,000 taxable income $3,000 unrecaptured 1250 gain (25% gain) $8,200 (0%/15% gain)].
The 0% alternative rate applies because Wilma’s ordinary taxable income puts her below the regular 25% bracket. The liability is $3,563 computed as shown below.
Tax on $24,800 ordinary taxable income ($36,000 TI $3,000 25% gain $8,200 0%/15% gain) from head of household tax rate schedule 15% tax on $3,000
Tax on $24,800 ordinary taxable income ($36,000 TI $3,000 25% gain $8,200 0%/15% gain) from head of household tax rate schedule $3,083 15% tax on $3,000 ,25% gain (regular tax rate is used since it is lower than the alternative tax rate) $450 0% tax on $8,200 0%/15% gain (alternative tax rate of 0% is lower than the regular tax rate of 15%) 0 Total Tax liability using alternative tax calculation $3,533 Regular Tax liability on $36,000 TI ($4,763) Tax savings from alternative tax computation $1,230Related Questions
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