Problem 3-42 (LoO. 6, 8) During the year, Inez, a single individual, recorded th

Question

Problem 3-42 (LoO. 6, 8) During the year, Inez, a single individual, recorded the following transactions involving capital assets. Gain on the sale of unimproved land (held as an investment for 3 years) Loss on the sale of a camper (purchased 2 years ago and used for family vacations) Gain on the sale of ADM stock (purchased 9 months ago as an investment) Gain on the sale of a fishing boat and trailer (acquired 18 months ago at an auction and $3,000 (5,000) 4,000 used for recreational purposes) 1000 Indicate the tax treatment for each item. Gain on the sale of unimproved land Loss on the sale of a camper Gain on the sale of ADM stock Gain on the sale of a fishing boat and trailer Long-term capital gain Not deductible V Ordinary income X Long-term capital gain Overall, Inez has a long-term capital gain of and a short term capital gain of 7 Check My Work

Explanation / Answer

Total long term gain Inez has is $4000 (3000 sale of unimproved land + 1000 gain on sale of fishing boat )

Short term gain =$3000 on sale of ADM stock.

Tax under 32%income tax bracket = 32% of $4000+$3000 = $2240.

Tax under 12% bracket for $35000 taxable income = $4200.

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