Perry is in the 33% tax bracket. During 2017, he had the following capital asset transactions: Perry's tax consequences from these gains are as follows:

Question

Quizplus · Accepted Answer

Perry's capital asset transactions result in gains of $10,000, $30,000, and $4,000. The tax rate on long-term capital gains for someone in the 33% tax bracket is 15%. Therefore, the taxes due on the $30,000 long-term capital gain would be $4,500 (15% of $30,000).

For the $10,000 short-term capital gain, Perry would owe ordinary income tax rates, which for someone in the 33% tax bracket would be 33%. Therefore, the taxes due on the $10,000 short-term capital gain would be $3,300 (33% of $10,000).

Finally, for the $4,000 long-term capital gain, Perry would owe taxes of $1,120 (28% of $4,000), which is the tax rate on long-term capital gains for someone in the 33% tax bracket.

Adding these amounts together, Perry's tax consequences would be:
(15% × $30,000) + (33% × $10,000) + (28% × $4,000) = $4,500 + $3,300 + $1,120 = $8,920

The best choice is thus B.

Perry Is in the 33% Tax Bracket