Problem 7-47 (LO 7-2) [The following information applies to the questions displa
ID: 2544997 • Letter: P
Question
Problem 7-47 (LO 7-2)
[The following information applies to the questions displayed below.]
During the current year, Ron and Anne sold the following assets: (Use the tax rate schedules.)
*$30,000 of the gain is 25 percent gain (from accumulated depreciation on the property).
Ignore the Net Investment Income Tax
Problem 7-47 Part-a
a. Given that Ron and Anne have taxable income of only $20,000 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2017 assuming they file a joint return? (Round all your intermediate computations to the nearest whole dollar amount.)
b. Given that Ron and Anne have taxable income of $400,000 (all ordinary) before considering the tax effect of their asset sales, what is their gross tax liability for 2017 assuming they file a joint return? (Round all your intermediate computations to the nearest whole dollar amount.)
Capital Asset Market Value Tax Basis Holding Period L stock $ 50,000 $ 41,000 > 1 year M stock 28,000 39,000 > 1 year N stock 30,000 22,000 < 1 year O stock 26,000 33,000 < 1 year Antiques 7,000 4,000 > 1 year Rental home 300,000* 90,000 > 1 year 2017 Tax Rate Schedule Schedule X-Single Schedule Z-Head of Household If taxable income is over: If taxable income is over. But not But not over: $ 13,350 $ 50,800 over The tax is: The tax is: 10% of taxable income $ 1 ,335.00 plus 1 5% of the excess over $13,350 $6,952.50 plus 25% of the excess over $50,800 $27,052.50 plus 28% of the excess over $131,200 $49,816.50 plus 33% of the excess over $212,500 $117,202.50 plus 35% of the excess over $416,700 $ 1 26,950.00 plus 39.6% of the excess over $444,550 $ 10% of taxable income $932.50 plus 15% of the excess over $9,325 $5.226.25 plus 25% of the excess over $37,950 $ 1 8.7 13.75 plus 28% of the excess aver $91,900 $ 46,643.75 plus 33% of the excess over $191,650 $ 1 2091 0.25 plus 35% of the excess over $416,700 $12 1,505.25 plus 39.6% of the excess cver $418,400 0 9,325 0 $ 9,325 $37,950 $ 9 1 ,900 $ 1 9 1 ,650 $41 6,700 $418,400 $ 37,950 $ 91,900 $ 1 9 1 ,650 $41 6,700 $41 8,400 $ 13,350 $ 50,800 $ 1 3 1,200 $212,500 $416,700 $444,550 $ 1 3 1,200 $21 2,500 $416,700 $444,550 Schedule Y-1-Married Flling Jointly or Qualifying Widow(er) Schedule Y-2-Married Filing Separately If taxable income is over. But not If taxable income is over: But not over: The tax is: over: The tax is: 0 $ 9,325 10% of taxable income $ 1.865.00 plus 15% of the excess over $18,650 $ 10.452.50 plus 25% of the excess over $75,900 $29,752.50 plus 28% of the excess over $153,100 $52.222.50 plus 33% of the excess cver $233,350 $112,728.00 plus 35% of the excess aver $416,700 $13 1 ,628.00 plus 39.6% of the excess over $470,700 $ 9,325 $ 37,950 $ 76,550 $116,675 $208,350 $235,350 $ 37,950 $ 76,550 $116,675 $208,350 $235,350 10% of taxable income $932.50 plus 15% of the excess over $9,325 $5,226.25 plus 25% of the excess over $37,950 $14,876.25 plus 28% of the excess over $76,550 $26,1 11.25 plus 33% of the excess over $116,675 $56,364.00 plus 35% of the excess over $208,350 $65,814.00 plus 39.6% of the excess over $235,350 0 $ 18,650 $ 18,650 $ 75,900 $153,100 $233,350 $416,700 $470,700 $ 75,900 $153,100 $233,350 $416,700 $470,700Explanation / Answer
a Capital Asset Market value Tax basis Taxable gain L stock $50,000 $41,000 $9,000 M stock $28,000 $39,000 $ -11,000 N stock $30,000 $22,000 $8,000 O stock $26,000 $33,000 $-7,000 Antiques $7,000 $4,000 $3,000 Rental home $3,00,000 $90,000 $2,10,000 $2,12,000 Other income $20,000 $2,32,000 Tax liability as per Schedule Y1 $29,753 Excess income over $153,100 $78,900 Tax on above @ 28% $22,092 $51,845 b Capital Asset Market value Tax basis Taxable gain L stock $50,000 $41,000 $9,000 M stock $28,000 $39,000 $-11,000 N stock $30,000 $22,000 $8,000 O stock $26,000 $33,000 $ -7,000 Antiques $7,000 $4,000 $3,000 Rental home $3,00,000 $90,000 $2,10,000 $2,12,000 Other income $40,000 $2,52,000 Tax liability as per Schedule Y1 $52,223 Excess income over $233,350 $18,650 Tax on above @ 33% $6,155 $58,378