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

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During $2022,$ 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 $11/22/2019$ $ $10,490$ $ $100$

$200$ shares of IBM common $4/3/202043,390300$

$3,000$ shares of Apple preferred $12/12/2020161,0001,300$

$2,100$ shares of Cisco common $8/14/202153,900550$

$420$ shares of Vanguard mutual fund $3/2/202216,100$ 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 $2022$ and to reinvest in municipal bonds. The following investment assets were sold in $2022$:

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

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

$3,000$ shares of Apple preferred $10/5222,8002,000$

$2,100$ shares of Cisco common $8/1563,390650$

$451$ shares of Vanguard mutual fund $12/2117,100$ 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 $$15,000$ 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 $2022$:

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 $6/30/2022.$

In $2016,$ Mrs$.$ Howell loaned $$7,400$ to a friend who was starting a new multilevel marketing company called LD$3.$ The friend declared bankruptcy in $2022,$ and Mrs$.$ Howell has been notified she will not be receiving any repayment of the loan.

The Howells have a $$3,700$ short$-$term capital loss carryover and a $$6,200$ 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 $$3,700$ in municipal bond interest, $$3,700$ in interest from corporate bonds, and $$5,400$ in qualified dividends.

Assume the Howells have $$165,000$ of wage income during the year.

Comprehensive Problem $07-63$ Part a$-2($Algo$)$

a$-2.$ 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.($Use the tax rate schedules, Dividends and Capital Gains Tax Rates.$)$