In 2018, Amber earned a salary of $230,000 and also had the following items of investment income: $28,000 net short-term capital gain on sale of stock, $8,000 dividend income, $6,000 interest income from corporate bonds, and $5,000 interest income from tax-exempt municipal bonds. Compute Amber's net investment income (NII) tax if the tax rate is 3.8% and the threshold is $200,000.

Question

Quizplus · Accepted Answer

First, we need to calculate Amber's NII by adding all the investment income:
$28,000 (short-term capital gain) + $8,000 (dividend income) + $6,000 (interest income from corporate bonds) + $5,000 (interest income from municipal bonds) = $47,000
Then, we need to determine if Amber's NII exceeds the threshold of $200,000:
$230,000 (salary) + $47,000 (NII) = $277,000 
Since $277,000 exceeds the threshold, we need to calculate the NII tax:
$47,000 (NII) x 3.8% (tax rate) = $1,796
Therefore, the correct answer is A, $1,596.

In 2018, Amber Earned a Salary of $230,000 and Also