Homework Set 6 solution - Spring 2014 - Tax 4001 Spring...

This preview shows page 1 - 3 out of 6 pages.

Tax 4001 Spring 2014 Homework Set #6 Solution PAGE 1 #1a Ordinary - inventory #1b Capital - a personal-use asset #1c §1231 - depreciable personal property used by a business #2a 1st: Net Short Term Capital Gains and Losses STCG 30,000 STCL (14,000) STCG (net) 16,000 2nd: Net Long Term Capital Gains and Losses LTCG 16,000 (A net 1231 GAIN is treated as a LTCG) LTCL (45,000) LTCL (net) (29,000) 3rd: Net Short and Long Term (because one is a gain, and the other is a loss) Net LTCL (13,000) Carryover (Back 3, Forward 5) For corporations, net capital losses are deductible only to the extent of capital gains. Thus, the net LTCL is a carryover (back 3 years, forward 5 years). #2b Taxable Income 230,000 (All carryover, so NO effect this year on taxable income) #3 Sales Price Basis Less: Interest Gain/Loss Antique Car 40,000 52,000 - (12,000) LTCL Fidelity Growth 36,000 17,000 - 19,000 LTCG Butler Bonds 51,000 42,000 500 8,500 LTCG Wood Stock 8,000 14,000 - (6,000) STCL 1st - Net Short Term Capital Gains and Losses Net STCL (6,000) 2nd - Net Long Term Capital Gains and Losses LTCG 19,000 LTCG 8,500 LTCL (12,000) Net LTCG 15,500 3rd: Net Short and Long Term (because one is a gain, and the other is a loss) Net LTCG 9,500 Taxed at the 15%. Interest income is taxed at taxpayer's marginal tax rate.