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Netting Gains and Losses

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5-44 Netting Gains and Losses. Trisha, whose tax rate is 35%, sells the following capital assets in 2007 with gains and
losses as shown:

Asset Gain or (loss) Holding Period

A $15,000 15 months

B 7,000 20 months

C (3,000) 14 months

a. Determine Trisha's increase in tax liability as a result of the three sales. All assets are stock held for investment. Ignore
the effect of increasing AGI on deductions and phase-out amounts.

b. Determine her increase in tax liability if the holding period for asset B is 8 months.

c. Determine her increase in tax liability if the holding periods are the same as in Part a but asset B is an antique clock.

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Solution Summary

This posting calculates the increase in tax liability for an individual whose tax rate is 35% and who sells capital assets with different holding periods for gains/losses.

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a. Determine Trisha's increase in tax liability as a result of the three sales. All assets are stock held for investment. Ignore
the effect of increasing AGI on deductions and phase-out amounts.

Net Capital gain: $19,000

Maximum tax rate ...

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