ases land for investment purposes in 2012 at a cost of $22,000. In 2017, she sel

Question

ases land for investment purposes in 2012 at a cost of $22,000. In 2017, she sells the land for $38,000. helsea, who is single, purch considering the land sale is $100,000. What is the effect of the sale of the land on her taxable income, and what is her tax lablity? Round all calculations to the nearest dollar. Assume a long- Chelsea's taxable income without term capital gains tax rate of 15%. The effect of the sale of land is that t Increases her taxable income by the amount of the capital gain Her taxable income is 116,000 and her tax

Explanation / Answer

Capital gain tax = ($38000 - $22000) x 15% = $2400
Tax on Ordinary Income $100,000 = $18,713.75 + 28%($100,000 - $91,900) = $20981.75
Total Tax Liability = $20,981.75 + $2400 = $23,381.75

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