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Capital gain/loss transactions for Reed in 2007

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)
10 months)

Gain on the sale of a city lot (held as and investment for 3,000
3 years)

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.

Solution Preview

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
Long ...

Solution Summary

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.