Cason is filing as single and has 2010 taxable income of $38,000 which includes $36,000 of 0%/15% net long-term capital gain.What is his tax on taxable income using the alternative tax method?

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Quizplus · Accepted Answer

Cason's ordinary income is $2,000 ($38,000 - $36,000). The tax on $2,000 at the 10% rate is $200. The $36,000 capital gain is taxed at 15%, resulting in $5,400. However, since the first $40,000 of income (including capital gains) is taxed at 0% for single filers in 2010, the capital gain tax is $0. Therefore, the total tax is $200.

Cason Is Filing as Single and Has 2010 Taxable Income