During the year, Ophelia recorded the following transactions involving capital a
ID: 2389659 • Letter: D
Question
During the year, Ophelia recorded the following transactions involving capital assets.Gain on the sale of unimproved land (held as an investment for 3 years): $3,000
Loss on sale of camper (purchased 2 years ago and used for family vacations): ($5,000)
Loss on the sale of ADM stock (purchased 9 months ago as an investment): ($1,000)
Gain on the sale of a fishing boat and trailer (acquired 11 months ago at an auction and used for recreational purposes): $2,000
a) If Ophelia is in the 35% bracket, how much income tax results?
b) If Ophelia is in the 15% bracket?
Explanation / Answer
Loss on the sale of camper is not allowed. There is a long-term gain for 3,000, a short term loss for 1,000, and a short term gain for 2,000. So she has a net long-term gain of 3,000 and a net short term gain of 1,000. a. If she is in the 35% tax bracket: 3,000*.15 + 1,000*.35 = $800. b. If she is in the 15% bracket: 3,000*0 + 1,000*.15 = $150.
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