Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

[The following information applies to the questions displayed below.] During the current year, Ron and Anne sold the following assets: (Use the dividends and capital

[The following information applies to the questions displayed below.]

During the current year, Ron and Anne sold the following assets: (Use the dividends and capital gains tax rates and tax rate schedules.)

Capital Asset Market Value Tax Basis Holding Period
L stock $ 50,000 $ 41,000 > 1 year
M stock 28,000 39,000 > 1 year
N stock 30,000 22,000 < 1 year
O stock 26,000 33,000 < 1 year
Antiques 7,000 4,000 > 1 year
Rental home 300,000* 90,000 > 1 year

*$30,000 of the gain is 25 percent gain (from accumulated depreciation on the property). Ignore the Net Investment Income Tax.

a. Given that Ron and Anne have taxable income of only $20,000 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2020 assuming they file a joint return? (Round all your intermediate computations to the nearest whole dollar amount.)

b. Given that Ron and Anne have taxable income of $400,000 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2020 assuming they file a joint return? (Round all your intermediate computations to the nearest whole dollar amount.)

Tax Rates for Net Capital Gains and Qualified Dividends

Rate* Taxable Income
Married Filing Jointly Married Filing Separately Single Head of Household Trusts and Estates
0% $0 - $80,000 $0 - $40,000 $0 - $40,000 $0 - $53,600 $0 - $2,650
15% $80,001 - $496,600 $40,001 - $248,300 $40,001 - $441,450 $53,601 - $469,050 $2,651 - $13,150
20% $496,601+ $248,301+ $441,451+ $469,051+ $13,151+

*This rate applies to the net capital gains and qualified dividends that fall within the range of taxable income specified in the table (net capital gains and qualified dividends are included in taxable income last for this purpose).

Schedule Y-1-Married Filing Jointly or Qualifying Widow(er)

If taxable income is over: But not over: The tax is:
$ 0 $ 19,750 10% of taxable income
$ 19,750 $ 80,250 $1,975 plus 12% of the excess over $19,750
$ 80,250 $171,050 $9,235 plus 22% of the excess over $80,250
$171,050 $326,600 $29,211 plus 24% of the excess over $171,050
$326,600 $414,700 $66,543 plus 32% of the excess over $326,600
$414,700 $622,050 $94,735 plus 35% of the excess over $414,700
$622,050 $167,307.50 plus 37% of the excess over $622,050

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Principles Of Auditing

Authors: Hugo Romero

1st Edition

1632409372, 978-1632409379

More Books

Students also viewed these Accounting questions

Question

Identify four applications of HRM to healthcare organizations.

Answered: 1 week ago