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    Capital Gains and Losses

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    I was hoping someone can help me with this problem:
    Trisha, whose tax rate is 35%, sells the following capital assets in 2007 with gains and losses as shown:
    Assets: Gain/Losses: 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 phaseout 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 Part a but asset B is an antique clock

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    Solution Preview

    A. The increase in tax liability is calculated as follows, add up the gains and subtract out the loss; then multiply by the appropriate tax rate. These are all long term so they are all in the same group. The total amount is $15,000 + $7,000 - $3,000 = $19,000. The $19,000 is then taxed at either 15% or 5% and since Trisha's regular tax rate is 35% she will be taxed at the ...

    Solution Summary

    This solution consists of calculation of increses in taxes due to capital gains.