1) If the asset is held for more than 12 months it is considered a long-term asset or investment. When a long-term investment is sold for more than it was purchased the result is a long-term gain and is taxed at a 15% rate. Assets or investments purchased and sold in less than 12 months are taxed at the marginal tax rate.

Kyle sold mutual fund shares, which she had owned for 5 years so that she could use the proceeds to travel with her sister. Kyle is in 22% tax bracket, and her capital gain from the sale was $20,000. It is a long-term or short-term capital gain? Apply the appropriate tax rate to determine the tax Kyle owes on the capital gain.

A. $5,250.

B. $4,200.

C. $3,000.

D. $2,250.

E. $1,500.

2)

For tax returns filed in 2023, taxpayers can deduct qualified, unreimbursed medical expenses that are more than 7.5% of their 2022 adjusted gross income. So if your adjusted gross income is $40,000, anything beyond the first $3,000 (40,000 x 0.075) of medical bills or 7.5% of your AGI could be deductible.

That means if you had $10,000 in medical bills, $7,000 of them could be deductible.

Mr. and Mrs. Franks, ages 30 and 28, respectively, have three children, ages 1, 3, and 5. For 2022, they have adjusted gross income (AGI) of $45,000 and unreimbursed medical expenses of $7,750. The Franks claim for itemized deductions for medical expenses is ________.

A. $0.

B. $1,000.

C. $3,375.

D. $4,375

E. $7,750.