Perry is in the 33% tax bracket.During 2012,he had the following capital asset transactions: 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 the above.

Question

Perry is in the 33% tax bracket.During 2012,he had the following capital asset transactions:  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 the above.

Quizplus · Accepted Answer

Perry had both long-term and short-term capital gains in 2012. The long-term gains of $30,000 are taxed at a rate of 15% (since Perry is in the 33% tax bracket), which gives a tax liability of $4,500. The short-term gain of $4,000 is taxed at the ordinary income tax rate of 33%, which gives a tax liability of $1,320. Therefore, Perry's total tax liability from these gains is ($4,500 + $1,320) = $5,820. Option B is the only choice that includes both the 15% and 33% tax rates, and it correctly calculates the tax liability from Perry's capital asset transactions.

Perry Is in the 33% Tax Bracket