Problem 3-50 (c) (LO. 6, 8) During the year, Isabelle recorded the following tra

Question

Problem 3-50 (c) (LO. 6, 8)

During the year, Isabelle recorded the following transactions involving capital assets.

Indicate the tax treatment for each item:

Overall, Isabelle has of $ and of $.

a. If Isabelle is in the 35% Federal income tax bracket, how much tax results?
$

b. If Isabelle is in the 15% bracket?
$

Transaction Amount Tax Treatment Loss on the sale of land held for investment (purchased 11 months ago) ($8,000) Gain on the sale of a personal speed boat (purchased seven years ago) 4,500 Gain on the sale of corporate stock (purchased four years ago as an investment) 12,500 Loss on the sale of a personal vehicle (purchased nine months ago) (3,500)

Explanation / Answer

Indicating the Tax Treatment for Each Item:

a) Calculation of the Tax Results with 35% Federal Income Tax Bracket:

Tax = -$8,000 + $4,500 + $12,500 - $3,500

= $5,500 * 35%

= $1,925

Therefore, the Tax is $1,925, with 35% Federal Income Tax Bracket.

b) Calculation of the Tax Results with 15% Federal Income Tax Bracket:

Tax = -$8,000 + $4,500 + $12,500 - $3,500

= $5,500 * 15%

= $825

Therefore, the Tax is $825, with 15% Federal Income Tax Bracket.

Transaction Amount Tax Treatment Loss on Sale of Land Held for Investment (Purchased 11 Months Ago) ($8,000) Nil Gain on Sale of a Personal Speed Boat (Purchased Seven Years Ago) $4,500 20% Gain on Sale of a Corporate Stock (Purchased Four Years Ago as an Investment) $12,500 Nil Loss on Sale of a Personal Vehicle (Puchased Nine Months Ago) ($3,500) Nil

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