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ECON138A_CASE_STUDY

ECON138A_CASE_STUDY - if his AGI was less than $150,000 in...

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TREVOR SALAS ECON 138A INCOME TAX CASE STUDY PERM: #3255593 11/19/11
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2. A. Tex Payer does not have to file a form 1099 for the California Municipal Bond interest because the interest from these bonds is tax exempt. B. For future stock sales, I would advise Tex to hold the stock longer than a year before selling in order to take advantage of the preferential long term capital gains tax rate (15%). Tex should also exercise his ISO’s in a year that he would not be exposed to the AMT. (The untaxed bargain element of the ISO’s is under AMT. C In order to avoid any 2011 penalties, Tex needs to pay at least 90% of what he paid in taxes during 2010 (20,266 x 90%= $18,203). He could also consider the safe harbor estimate that says
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Unformatted text preview: if his AGI was less than $150,000 in the previous year, he could avoid penalties by paying 100% of his previous year tax. D. Tex’s marginal rate is 25% because his income is $77,645(line 43, form 1040). This puts him in the $34,000-$82,400 bracket of 25% 3. Extra Credit Tex’s $1,818 portion of the building depreciation was calculated on a straight-line basis. To get this amount use the amount that Tex and his father built the cabin for in 2006, which is $100,000. Next you need the usefil life of the property, which is 27.5 years. Calculations: $100,000/27.5yrs= $3,636 per year Tex owns 50% of the property, so his portion is: $3,636 x 50%= $1,818....
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