Comprehensive Problem $07-63($LO $07-1,$ LO $07-2,$ LO $07-3,$ LO $07-4)($Algo$)$

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During $2023,$ your clients, Mr$.$ and Mrs$.$ Howell, owned the following investment assets:

Investment Assets Date Acquired Purchase Price Broker's Commission Paid at Time of Purchase

$300$ shares of IBM common $($NYSE: IBM$)11/22/2020$ $ $10,520$ $ $100$

$200$ shares of IBM common $($NYSE: IBM$)4/3/202143,420300$

$3,000$ shares of Apple preferred $($NASDAQ: AAPL$)12/12/2021164,0001,300$

$2,100$ shares of Cisco common $($NASDAQ: CSCO$)8/14/202254,200550$

$420$ shares of Vanguard mutual fund $3/2/202316,400$ No$-$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 the mutual fund in $2023$ and to reinvest in municipal bonds. The following investment assets were sold in $2023$:

Investment Assets Date Sold Sale Price Broker's Commission Paid at Time of Sale

$300$ shares of IBM common $5/6$ $ $15,400$ $ $100$

$3,000$ shares of Apple preferred $10/5223,1002,000$

$2,100$ shares of Cisco common $8/1563,420650$

$451$ shares of Vanguard mutual fund $12/2117,400$ No$-$load fund$*$

$*$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 $$15,300$ 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 $2023$:

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 $6/30/2023.$

In $2017,$ Mrs$.$ Howell loaned $$7,700$ to a friend who was starting a new multilevel marketing company called LD$3.$ The friend declared bankruptcy in $2023,$ and Mrs$.$ Howell has been notified she will not be receiving any repayment of the loan.

The Howells have a $$4,000$ short$-$term capital loss carryover and a $$6,500$ 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 $$3,850$ in municipal bond interest, $$3,850$ in interest from corporate bonds, and $$5,700$ in qualified dividends.

Assume the Howells have $$172,500$ of wage income during the year.

Comprehensive Problem $07-63$ Part a $($Algo$)$

a$.$ 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 $$30,000.$ Assume that asset bases are reported to the IRS. $($Use the tax rate schedules, Dividends and Capital Gains Tax Rates.$)$

Mr$.$ Howell social security number: $412-34-5670$

Note: Negative amounts should be indicated by a minus sign. Use $2023$ tax rules regardless of year on tax form.