Kendrick,who has a 35% marginal tax rate,had the following results from transactions during the year: After offsetting the STCL,what is (are)the resulting gain(s)?

Question

Kendrick,who has a 35% marginal tax rate,had the following results from transactions during the year:  After offsetting the STCL,what is (are)the resulting gain(s)?

Quizplus · Accepted Answer

To calculate the resulting gains, we need to first offset the short-term capital loss (STCL) of $4,000 against any short-term capital gains (STCG) and collectibles gains. Looking at the transactions, we see that Kendrick had a STCG of $2,000 from transaction 2, which means the remaining $2,000 of the STCL can be offset against the collectibles gain in transaction 5.

Now, we can calculate the gains for each transaction:
- Transaction 1: No gain/loss since Kendrick sold for the same amount he bought it for
- Transaction 2: STCG of $2,000
- Transaction 3: No gain/loss since Kendrick sold for the same amount he bought it for
- Transaction 4: LTCG of $8,000 ($20,000 - $12,000 - $100)
- Transaction 5: Collectibles gain of $16,000 ($35,000 - $19,000)

Adding up the gains, we get a total LTCG of $8,000 + $8,000 = $16,000 and a total collectibles gain of $16,000. Since Kendrick's marginal tax rate is 35%, the collectibles gain will be taxed at a maximum rate of 28%, while the LTCG will be taxed at 15%. Therefore, the resulting gains are $16,000 (collectibles gain) + $8,000 (LTCG taxed at 15%) = $24,000.

Kendrick,who Has a 35% Marginal Tax Rate,had the Following Results