Question
63. During 2020. your clients, Mr. and Mrs. Howell, owned the following investment assets : Date Purchase Broker's Commission Paid Investment Assets Acquired Price at
63. During 2020. your clients, Mr. and Mrs. Howell, owned the following investment assets : Date Purchase Broker's Commission Paid Investment Assets Acquired Price at Time of Purchase 300 shares of IBM common1422/2017 $ 10,350 $ 100 200 shares of IBM common 4/3 / 2018 43,250 300 3,000 shares of Apple preferred 12/12 / 2018 147,0001,300 2,100 shares of Cisco common 8/14 52,500550 420 shares of Vanguard mutual fund 3/2 / 202 14,700 Noload fund No are charged when mutual und sold
*No commissions are charged when no-load mutual funds are bought and sold. 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 as $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 2020: 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 6/30/2020. . In 2014, Mrs. Howell loaned $6,000 to a friend who was starting a new multilevel marketing company called LD3. The Page 7-42 friend declared bankruptcy in 2020, and Mrs. Howell has been notified she will not be receiving any repayment of the loan. The Howells have a $2,300 short-term capital loss carryover and a $4,800 long-term capital loss carryover from prior years. The Howells did not instruct their broker to sell any particular lot of IBM stock. The Howells earned $3,000 in municipal bond interest, $3,000 in interest from corporate bonds, and $4,000 in qualified dividends. Assume the Howells have $ 130,000 of wage income during the year. a) Go to the IRS website (www.irs.gov) and download the most current version of Form 8949 and Form 1040 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 year (ignoring the alternative minimum tax and any phase-out provisions) assuming they file a joint return, they have no dependents, they don't make any special tax elections, and their itemized deductions total $25,000. Assume that asset bases are reported to the IRS. b) Are there any tax planning recommendations related to the stock sales that you should have shared with the Howells before their decision to sell? c) Assume the Howells' short-term capital loss carryover from prior years is $82,300 rather than $2,300 as indicated above. If this is the case, how much short-term and long-term capital loss carryover remains to be carried beyond 2020 to future tax years?
Investment AssetsDateAcquiredPurchasePriceBrokersCommissionPaid at Timeof Purchase300 shares of IBM common11/22/2015$10,350$100200 shares of IBM common4/3/2016$43,250$3003,000 shares of Apple preferred12/12/2016$147,000$1,3002,100 shares of Cisco common8/14/2017$52,500$550420 Shares of Vanguard mutual fund3/2/2018$14,700No load fund**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 mutual fund in 2018 and to reinvest in municipal bonds. The following investment assets were sold in 2018:Investment AssetsDate SoldSalePriceBrokersCommission Paidat Time of Sale300 shares of IBM common5/6$13,700$1003,000 shares of Apple preferred10/5$221,400$2,0002,100 shares of Cisco common8/15$63,250$650451 Shares of Vanguard mutual fund12/21$15,700No load fund
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