Principles of Taxation for business and investment planning 2016

CH16-AP30

Mr. and Mrs. Poe earned $115,900 compensation income and $963 interest this year and recognized a $600 short-term capital gain and a $7,200 long-term capital gain on the sale of securities. They incurred $4,400 investment interest expense and $12,500 other itemized deductions. They have no dependents. Assume the taxable year is 2015. Use Individual tax rate schedules.

a. Compute the Poes income tax on a joint return if they dont elect to treat any long-term capital gain as investment income.(Taxable income=$102,600)

b. Compute the Poes income tax if they elect to treat enough long-term capital gain as investment income to allow them to deduct their investment interest.(Taxable income=$99,763)