During 2007, Reed had the following transactions involving capital assets:
Gain on the sale of customized ice-fishing cabin $8,000
(held for 11 months and used for recreational purposes
Loss from a garage sale (personal clothing, furniture, (6,000)
appliances held for more than a year)
Loss on the sale of GMC stock (held as an investment for (1,000)
Gain on the sale of a city lot (held as and investment for 3,000
a) If Reed is in the 28% tax bracket, how much income tax results?
b) If Reed is in the 15% braket?
I know that long term gains have the alternative tax computation if the tax payers regular tax bracket exceeds the applicable alternative tax, but in a) it does not.
In b) I think it drops to 5% for long term gains because he in the 15% or less category.
Reed would have the following capital gain transactions:
Short term gain of $8000
No deductible loss on personal assets
Short term loss on GM stock of $1000
The solution explains the tax impact of each transaction and the calculations of capital gain tax. Also included are notes about the AMT tax as it could apply.