Chapter 7 HW Solutions

Chapter 7 HW Solutions - 16 Capital Gains Tax Rates...

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16. Capital Gains Tax Rates Solution: a. 0%. b. 15% unless included gains put the taxpayer in a higher tax bracket; then the gain exceeding the 15% bracket is taxed at 28%. c. 15% unless included gains put the taxpayer in a higher tax bracket; then the gain exceeding the 15% bracket is taxed at 25%. 17. Realized Gain or Loss Solution: a. ($40,000 + $19,000 - $2,000) - $47,000 = $10,000 realized gain. b. ($40,000 + $19,000 - $2,000) - $67,000 = $10,000 realized loss. 18. Determination and Character of Gains and Losses Solution: a. $5,000 + $15,000 + $13,000 = $33,000 amount realized. b. $33,000 - $34,000 = $1,000 loss. c. Long-term capital loss. d. If the property had been used in a business, it would be Section 1231 property and Allan would have a Section 1231 loss. 21. Determination and Character of Gains and Losses Solution: a. DDF has $507,000 ($575,000 - $68,000) Section 1231 gain on the land sale. It has a $635,000 ($125,000 - $760,000) Section 1231 loss on the sale of the equipment. b. The $635,000 loss is netted against the $507,000 gain. The result is a $128,000 net Section 1231 loss that is deducted against DDF Corporation’s ordinary income. 22. Determination and Character of Gain Solution: $27,000 - $17,000 = $10,000 total gain. $7,000 ($24,000 - $17,000) of the gain is
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