Perry is in the 33% tax bracket.During 2016,he had the following capital asset transactions:
Gain from the sale of a stamp collection (held for 10 years)
$30,000
Gain from the sale of an investment in land (held for 4 years)
10,000
Gain from the sale of stock investment (held for 8 months)
4,000
Perry's tax consequences from these gains are as follows:
A)(15% × $30,000)+ (33% × $4,000).
B)(15% × $10,000)+ (28% × $30,000)+ (33% × $4,000).
C)(0% × $10,000)+ (28% × $30,000)+ (33% × $4,000).
D)(15% × $40,000)+ (33% × $4,000).
E)None of these.

Question

Quizplus · Accepted Answer

The gains from the sale of the stamp collection and land are long-term capital gains since they were held for more than one year. Therefore, they are subject to a maximum tax rate of 20%.

15% × $10,000 = $1,500 (tax on gain from sale of land)

28% × $30,000 = $8,400 (tax on gain from sale of stamp collection)

The gain from the sale of the stock investment is short-term since it was held for less than one year. Therefore, it is subject to Perry's ordinary income tax rate of 33%.

33% × $4,000 = $1,320 (tax on gain from sale of stock investment)

Adding the three amounts together gives us:

$1,500 + $8,400 + $1,320 = $11,220

Therefore, the best choice is B.

Perry Is in the 33% Tax Bracket