J is a single, calendar year, individual taxpayer.She has taxable income for the year 2011 of $65,000, including a net short-term capital loss of $5,000 and a net long-term (15 percent) capital gain of $10,000.The 2011 tax schedules for single taxpayers are as follows: J's federal gross income tax for 2011 is

Question

J is a single, calendar year, individual taxpayer.She has taxable income for the year 2011 of $65,000, including a net short-term capital loss of $5,000 and a net long-term (15 percent) capital gain of $10,000.The 2011 tax schedules for single taxpayers are as follows:  J's federal gross income tax for 2011 is

Quizplus · Accepted Answer

First, we need to calculate J's taxable income by subtracting the net short-term capital loss from the net long-term capital gain:
$65,000 - $5,000 + $10,000 = $70,000
Next, we need to use the tax schedule for single taxpayers to calculate the federal gross income tax:
$8,500 x 10% = $850
$26,000 - $8,500 = $17,500
$17,500 x 15% = $2,625
$70,000 - $26,000 = $44,000
$44,000 x 25% = $11,000
$850 + $2,625 + $11,000 = $14,475
However, there is a maximum amount that a single taxpayer can pay at the 15% and 25% tax rates combined, which is $11,375 for tax year 2011. So, J's federal gross income tax for 2011 is $11,375. Therefore, the best choice is C.

J Is a Single, Calendar Year, Individual Taxpayer