Asok\'s AGI for 2016 is $133,050. Included in this AGI is a $45,000 25% long-ter

Question

Asok's AGI for 2016 is $133,050. Included in this AGI is a $45,000 25% long-term capital gain and a $13,000 0%/15%/20% long-term capital gain. Asok is single, uses the standard deduction, and has only his personal exemption.

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When computing the tax on the gain, calculate each part separately, rounding interim calculations to two decimal places. Then, round your final answer for the tax to the nearest dollar. Asok's taxable income is $??? , the tax liability using the alternative tax approach is $??? , and the tax savings from the alternative tax on net capital gain is $???.

Explanation / Answer

Asok’s taxable income is $123,700 ($133,050 AGI – $5,700 standard deduction – $3,650 personal exemption)

Tax on $65,700 ordinary taxable income ($123,700 TI – $45,000                           

25% gain – $13,000 0%/15% gain) from single tax rate                                     

schedule $12,606

25% tax on $16,700 of 25% gain (regular tax rate is the same as                                  

                  the alternative tax rate until taxable income exceeds $82,400)                        4,175

25% tax on $28,300 of remaining 25% gain (alternative tax rate                                   

of 25% is lower than the regular tax rate of 28%) 7,075

15% tax on $13,000 0%/15% gain (alternative tax rate of 15% is                                  

lower than regular tax rate of 28%)                                                           1,950

Total tax liability using the alternative tax calculation $25,806

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