During the current year, Ron and Anne sold the following assets: Capital Asset M
ID: 2568387 • Letter: D
Question
During the current year, Ron and Anne sold the following assets:
Capital Asset Market value Tax Basis Holding period
L stock $50,000 $81,000 > 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 300,000 270,000 > 1 year
$30,000 of the gain is is 25 percent gain ( from accumulated depreciation on the property)
Given that Ron and Anne have taxable income of only $50,000 ( all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2016 assuming they file a joint return?
Explanation / Answer
Capital Asset
Market value
Tax Basis
Holding Period
Nature
L stock
50000
81000
>1
Long Term
-31000
M stock
28000
39000
>1
Long Term
-11000
N stock
30000
22000
<1
Short Term
8000
O stock
26000
33000
>1
Long Term
-7000
Antiques
300000
270000
>1
Long Term
30000
Short term gain (loss)
8000
Long term gain (loss)
-19000
Net Capital Loss
-11000
During current year the capital loss exceeds capital gain (-$11,000) which can be carried forward to future years.
Threshold of $3,000 (joint return) is eligible for deduction from taxable income of $50,000 i.e tax needs to be paid on $47,000 ($50,000-$3.000).
Tax liability
$ 50,000.00
(less) eligible deduction of capital loss
$ -3,000.00
(less) Standard deductions (married couples filing jointly)
$ -12,600.00
Gross Tax Liability
$ 34,400.00
Capital Asset
Market value
Tax Basis
Holding Period
Nature
L stock
50000
81000
>1
Long Term
-31000
M stock
28000
39000
>1
Long Term
-11000
N stock
30000
22000
<1
Short Term
8000
O stock
26000
33000
>1
Long Term
-7000
Antiques
300000
270000
>1
Long Term
30000
Short term gain (loss)
8000
Long term gain (loss)
-19000
Net Capital Loss
-11000
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