Perry is in the 32% tax bracket. During 2018, he had the following capital asset transactions:
Perry's tax consequences from these gains are as follows:
A) (15% × $30,000) + (32% × $4,000).
B) (15% × $10,000) + (28% × $30,000) + (32% × $4,000).
C) (0% × $10,000) + (28% × $30,000) + (32% × $4,000).
D) (15% × $40,000) + (32% × $4,000).
E) None of these.

Question

Perry is in the 32% tax bracket. During 2018, he had the following capital asset transactions: 
Perry's tax consequences from these gains are as follows:
A) (15% × $30,000) + (32% × $4,000). 
B) (15% × $10,000) + (28% × $30,000) + (32% × $4,000). 
C) (0% × $10,000) + (28% × $30,000) + (32% × $4,000). 
D) (15% × $40,000) + (32% × $4,000). 
E) None of these.

Quizplus · Accepted Answer

Perry had a long-term gain of $30,000 and a short-term gain of $4,000. Long-term capital gains are taxed at a lower rate than short-term capital gains. Perry's long-term capital gains fall in the 15% tax bracket, while his short-term gains fall in the 32% tax bracket. Therefore, Perry's tax consequences are (15% × $10,000) + (28% × $30,000) + (32% × $4,000).

Perry Is in the 32% Tax Bracket