Sandra, a single taxpayer with a marginal tax rate of 35 percent, sold the follo
ID: 2532830 • Letter: S
Question
Sandra, a single taxpayer with a marginal tax rate of 35 percent, sold the following assets during the year:
Asset
Sale Price
Tax Basis
Gain/Loss
Holding Period
XOM Stock
$
50,000
$
60,000
$
(10,000
)
More than 1 Year
GTE Stock
$
12,000
$
6,000
$
6,000
Less than 1 Year
Coin Collection
$
20,000
$
5,000
$
15,000
More than 1 Year
Bank Stock
$
11,000
$
19,000
$
(8,000
)
Less than 1 Year
Rental Home
$
125,000
$
50,000
$
75,000
*
More than 1 Year
*$30,000 of the gain is §1250 recapture. The remaining gain is 0/15/20 percent gain. What are Sandra’s recognized gains/losses for the year and what tax rate(s) will apply to those gains/losses?
Asset
Sale Price
Tax Basis
Gain/Loss
Holding Period
XOM Stock
$
50,000
$
60,000
$
(10,000
)
More than 1 Year
GTE Stock
$
12,000
$
6,000
$
6,000
Less than 1 Year
Coin Collection
$
20,000
$
5,000
$
15,000
More than 1 Year
Bank Stock
$
11,000
$
19,000
$
(8,000
)
Less than 1 Year
Rental Home
$
125,000
$
50,000
$
75,000
*
More than 1 Year
Explanation / Answer
Short term capital gain / (loss) of Sandra
Stocks
Amount ($)
GTE stock
6000
Bank stock
(8000)
Short term capital loss
(2000)
Short term capital loss shall be carried forward to be set off against future short term capital gain only. The short term capital gain is taxed at the ordinary income tax rate applicable to a tax payer. Thus, in case of Sandra any short term capital gain of her shall be taxed at the rate of 35% since she belongs to 35% tax bracket.
Long term capital gain / loss of Sandra
Stocks
Amount ($)
Amount ($)
XOM Stock
-10000
Coin collection
15000
Rental home
75000
Net long term capital gain
80000
Long term capital gain shall be taxed @15% as Sandra is in 35% tax bracket (80000 x 15%)
12000
The long term capital gain is taxed at the rate 15% for the tax payers that belong to the 35% tax bracket accordingly, since Sandra is in 35% tax bracket hence, the long term capital gain of her shall be taxed at 15%.
Short term capital gain / (loss) of Sandra
Stocks
Amount ($)
GTE stock
6000
Bank stock
(8000)
Short term capital loss
(2000)
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