common 81409 52500 550 420 Shares of Vanguard mutual fund 3210 14700 No load

Common 81409 52500 550 420 shares of vanguard mutual

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common 8/14/09 $52,500 $550 420 Shares of Vanguard mutual fund 3/2/10 $14,700 No load fund* *No commissions are charged when no load mutual funds are bought and sold. Because of the downturn in the stock market, Mr. and Mrs. Howell decided to sell most of their stocks and mutual fund in 2010 and to reinvest in municipal bonds. The following investment assets were sold in 2010: Investment Assets Date Sold Sale Price Broker’s Commission Paid at Time of [email protected] 300 shares of IBM common 5/6/10 $13,700 $100 3,000 shares of Apple preferred 10/5/10 $221,400 $2,000 2,100 shares of Cisco common 8/15/10 $63,250 $650 451 Shares of Vanguard mutual fund 12/21/10 $15,700 No load fund* *No commissions are charged when no load mutual funds are bought and sold. 11-5
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Topic 10 - Investments The Howells’ broker issued them a Form 1099 showing the sales proceeds net of the commissions paid. For example, the IBM sales proceeds were reported as $13,600 on the Form 1099 they received. In addition to the sales reflected in the table above, the Howell’s provided you with the following additional information concerning 2010: The Howells received a Form 1099 from the Vanguard mutual fund reporting a $900 long-term capital gain distribution. This distribution was reinvested in 31 additional Vanguard mutual fund shares on 6/30/10. In 2005, Mrs. Howell loaned $6,000 to a friend who was starting a new multilevel marketing company called LD3. The friend declared bankruptcy in 2010, and Mrs. Howell has been notified that she will not be receiving any repayment of the loan. The Howells have a $2,300 short-term capital loss carryover and a $4,800 long- term capital loss carryover from prior years. The Howells did not instruct their broker to sell any particular lot of IBM stock. The Howells earned $3,000 in municipal bond interest, $3,000 in interest from corporate bonds, and $4,000 in qualified dividends. The Howells paid $5,000 in investment interest expense during the year ($1,000 is attributable to their municipal bond investments). The Howells paid $2,000 for investment advice during the year but did not have any additional miscellaneous itemized deductions. Assume the Howells have $130,000 of wage income during the year. a. Go to the IRS web site ( ) and download the most current version of Schedule D. Use page 1 of Schedule D to compute net long-term and short-term capital gains. Then, compute the Howells’ tax liability for the year (ignoring the alternative minimum tax and any phase-out provisions) assuming they file a joint return, they have no dependents, they don’t make any special tax elections, and their itemized deductions total $25,000. The Howell’s Schedule D for the year would be completed as follows : 11-6
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Topic 10 - Investments 11-7
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Topic 10 - Investments The Howell’s net capital gain is then included with their other income for the year in calculating their final tax liability for the year.
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