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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