Tom Johnson, whose marginal tax rate on ordinary income is 35%, sold four investment assets resulting in the following capital gains and losses. $$\begin{array} { | l | r | }
\hline \text { short-tern capital gair } & \$ 3,800 \
\hline \text { \$hort-term capital loss } & \$ ( 5,000 ) \
\hline \text { Iong-tern capital gair } & \$ 39,000 \
\hline \text { Iong-tern capital loss } & \$ ( 35,100 ) \
\hline
\end{array}$$ How much of Tom's net capital gain is taxed at 15%?

Question

Tom Johnson, whose marginal tax rate on ordinary income is 35%, sold four investment assets resulting in the following capital gains and losses. $$\begin{array} { | l | r | } 
\hline \text { short-tern capital gair } & \$ 3,800 \
\hline \text { \$hort-term capital loss } & \$ ( 5,000 ) \
\hline \text { Iong-tern capital gair } & \$ 39,000 \
\hline \text { Iong-tern capital loss } & \$ ( 35,100 ) \
\hline
\end{array}$$ How much of Tom's net capital gain is taxed at 15%?

Quizplus · Accepted Answer

First, we need to find Tom's total net capital gain. To do this, we add up all the capital gains and losses:

$3,800 - $5,000 + $39,000 - $35,100 = $2,700

So Tom's total net capital gain is $2,700. We know that some of this will be taxed at 15%, since the 15% tax rate applies to long-term capital gains. To find out how much, we need to calculate Tom's long-term capital gains minus his long-term capital losses:

$39,000 - $35,100 = $3,900

So $3,900 of Tom's net capital gain will be taxed at 15%. Therefore, the answer is C) $2,700.

Tom Johnson, Whose Marginal Tax Rate on Ordinary Income Is