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Capital Gain and Loss

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 inPart a but asset B is an antique clock.

Solution Preview

a. When the three sales are all held long term and they are all stocks the gains are added together and the losses are netted against them. The calculation is as follows: Add $15,000 + $7,000 - $3,000 = $ 19,000 * .15 = $2,850. Trisha gets to take the 15 percent bracket on her stock sales because her normal tax bracket is the 35 ...

Solution Summary

This solution is a calculation of capital gain and loss in various situations and the netting process.