Question

Mary files as Head of Household and has the following gains and losses during 2019: LTCG LTCL STCG STCL $12,000 4.000 4,000 8,000 With respect only to her Gains Losses, how much is Mary's tax liability if she has taxable income of $50,000 and is in the 12% tax bracket? How much is her tax liability for her gains/losses if Mary's taxable income is $70,000 and her tax bracket is 22% (not 12%)?

Answer 1

Her net capital gain position is:

Particulars	Amount	Amount
Long-term capital gains	$      12,000
Long-term capital loss	$      (4,000)
Net long-term capital gain		$        8,000
Short term capital gain	$        4,000
Short-term capital loss	$      (8,000)
Net short-term capital loss		$      (4,000)
Net long-term capital gain		$        4,000

Taxpayer has net position of $4,000 net capital gain. Tax payable on all income is:

(a)

Tax payable on $54,000 taxable income is:

Particulars	Amount	Tax
Tax payable on $50,000 normal income using tax rate schedule
[$1,385 + ($50,000 - $13,850)× 12%]		$        5,723
Tax on capital gains:
Income taxable at 0% rate:
Taxable income including capital gains	$      54,000
Less: 0% tax bracket	$    (52,850)
0% capital gains	$        1,150
Income taxable at 15% rate:
Capital gains	$        4,000
Less: 0% capital gains	$      (1,150)
15% capital gains	$        2,850
Tax on capital gains [$2,850 × 15%]		$      427.50
Total tax		$   6,150.50

(b)

Tax payable on $74,000 taxable income is:

Capital gains are taxable at flat 15% in the given scenario.

Particulars	Amount	Tax
Tax payable on $70,000 normal income using tax rate schedule
[$6,065 + ($70,000 - $52,850)× 22%]		$        9,838
Tax on capital gains:
Tax on capital gains [$4,000 × 15%]		$      600.00
Total tax		$ 10,438.00