Problem 3-49 (LO. 8)

During 2023, Chester (a married taxpayer filing a joint return) had the following transactions involving capital assets:

Gain on the sale of an arrowhead collection (acquired as an investment at different times but all pieces have been held for more than 1 year)$6,000Loss on the sale of IBM Corporation stock (purchased 11 months ago as an investment)(3,500)Gain on the sale of a city lot (acquired 5 years ago as an investment)2,000

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a. Indicate the tax treatment for each item.

Gain on the sale of an arrowhead collectionLong-term capital gainShort-term capital gainNot taxableOrdinary incomeLong-term capital gainLoss on the sale of IBM Corporation stockShort-term capital lossLong-term capital lossNot deductibleOrdinary lossShort-term capital lossGain on the sale of a city lotLong-term capital gainShort-term capital gainNot taxableOrdinary incomeLong-term capital gain

Overall, Chester has

a long-term capital gaina long-term capital lossordinary incomea long-term capital gain

of $fill in the blank 36997c01efa6f89_5. However, $fill in the blank 36997c01efa6f89_6 of this gain is from collectibles, which are taxed at a maximum rate of

28%12%0%28%

.

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When property is sold or otherwise disposed of, gain or loss may result. All realized gains are recognized (taxable) unless some specific part of the tax law provides otherwise. Generally, losses realized from the disposition of personal-use property (property neither held for investment nor used in a trade or business) are not recognized.

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b. If Chester has taxable income (including the property transactions) of $378,400, what is the income tax regarding these transactions? He has a marginal tax rate of 32%. $fill in the blank 204d4afa9fb906c_1

If Chester has taxable income (including the property transactions) of $74,125, what is the income tax regarding these transactions? He has a marginal tax rate of 12%. $fill in the blank 204d4afa9fb906c_2