In December, 2014, Ben and Jeri (married, filing jointly) have a long-term capital gain of $55,000 on the sale of stock held for 4 years. They have no other capital gains and losses for the year. After standard deduction and personal exemptions, their ordinary income for the year, before the capital gain, is $73,800, making their total income for the year $128,800, ($73,800 + $55,000). In 2014, married taxpayers pay tax of $10,163 at 10-percent and 15-percent rates (from the tax rate schedules) on the first $73,800 of ordinary taxable income and 25 percent on ordinary taxable income up to $148,850. What is their total tax liability?

Question

Quizplus · Accepted Answer

The $55,000 capital gain is taxed at the 15% long-term capital gains rate. The ordinary income of $73,800 is taxed at $10,163. The capital gain tax is $55,000 * 15% = $8,250. Total tax liability is $10,163 + $8,250 = $18,413.

In December, 2014, Ben and Jeri (Married, Filing Jointly) Have