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Tax Liability, AGI, and Capital Transactions

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1- Emma had the following transactions for 2012:
Salary $80,000
Alimony received 4,000
Recovery from car accident --
Personal injury damages $40,000
Punitive damage 70,000 110,000
Gift from parents 20,000
Property sales --
Loss sale of boat (used for pleasure and owned 4 years) ($ 4,000)
Gain on sale of ADM stock(held for 10 month as an investment) 4,000 (-0-)

What is Emma's AGI for 2012?

2- During 2012, Addison has the following gains and losses:

LTCG $10,000
LTCL 3,000
STCG 2,000
STCG 7,000

A) How much is Addison's tax liability if she is in the 15% tax bracket?
B) If her tax bracket is 33% (not 15%)?

3 - During 2012, Madison has salary income of $80,000 and the following capital transactions:
LTCG $13,000
LTCL 15,000
STCG 13,000
STCG 6,000

How are these transactions handled for income tax purposes?

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Solution Summary

This solution calculates Emma's AGI for 2012. Addison's tax liability in various tax brackets is also calculated, and Madison's transactions for income tax purposes is also thoroughly explained.

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1- Emma had the following transactions for 2012:
Salary $80,000
Alimony received 4,000
Recovery from car accident --
Personal injury damages $40,000
Punitive damage 70,000 110,000
Gift from parents ...

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