Geneva,a sole proprietor,sold one of her business assets for a $5,000 long-term capital gain.Geneva's marginal tax rate is 25%.Gulf,a C corporation,sold one of its assets for a $5,000 long-term capital gain.Gulf's marginal tax rate is 25%.What tax rates are applicable to these capital gains?
A)15% rate applies to both Geneva and Gulf.
B)15% rate applies to Geneva and 25% rate applies to Gulf.
C)15% rate applies to Gulf and 25% rate applies to Geneva.
D)25% rate applies to both Geneva and Gulf.
E)None of the above.

Question

Quizplus · Accepted Answer

Both Geneva and Gulf are subject to the 15% long-term capital gains tax rate at the federal level. However, Geneva may also be subject to state capital gains taxes, which could increase her overall tax rate. Since Gulf is a corporation, it does not pay individual income taxes, and its capital gains are subject to a flat 21% corporate tax rate. Therefore, Gulf's marginal tax rate of 25% is not applicable to its capital gains.

Geneva,a Sole Proprietor,sold One of Her Business Assets for a $5,000