Federal Tax Quiz

SAMPLE SOLUTION TAXPAYER INFORMATION Marital status Single Ordinary income before capital gains (losses) 15,000 For AGI deductions None Itemized deductions None Standard deduction 12,400 QBID None Tax credits None SALES DATA CHARACTER CHECK TOTALS Description Date Purchased Date Sold Adjusted Basis Amount Realized Holding Type Gain (Loss) Stock A 1/1/2001 12/31/2020 3,000 1,000 LT 15 (2,000) ST 15 (3,000) – Stock B 1/1/2001 12/31/2020 10,000 60,000 LT 15 50,000 LT 28 – – Stock C 1/2/2020 12/31/2020 2,000 1,000 ST 15 (1,000) LT 25 – – Stock D 1/2/2020 12/31/2020 3,000 1,000 ST 15 (2,000) LT 15 48,000 – Antiques 1/1/2001 12/31/2020 1,000 1,000 LT 28 – Rental property 1/1/2001 12/31/2020 50,000 50,000 LT 25 – NETTING ST LT LT LT 28 25 15 Long-Term Description Short-Term 28-Percent 25-Percent 0/15/20-Percent Stock A – – – (2,000) Stock B – – – 50,000 Stock C (1,000) – – – Stock D (2,000) – – – Antiques – – – – Rental property – – – – Subtotal (3,000) – – 48,000 Netting:ST -> 28 – – ST -> 25 – – ST ->0/15/20 3,000 (3,000) Total – – – 45,000 TAX FORMULA AND CHARACTER SUMMARY INCOME:Ordinary income 15,000 Short-term capital gains (losses) – Long-term capital gains (losses)28-percent – 25-percent – 0/15/20-percent 45,000 TOTAL INCOME 60,000 DEDUCTIONS FOR AGI – AGI 60,000 DEDUCTIONS FROM AGI:Standard deduction 12,400 QBID – TOTAL DEDUCTIONS FROM AGI 12,400 TAXABLE INCOME 47,600 TAXABLE INCOME BY CHARACTER:Ordinary 2,600 Net capital gain:28-percent – 25-percent – 0/15/20-percent 45,000 TOTAL TAXABLE INCOME BY CHARACTER 47,600 TAX BASE TAX Ordinary income 2,600 260.00 25 percent gain taxed at ordinary rates – – 28 percent gain taxed at ordinary rates – – 0/15/20-percent gain taxed at 0% 37,400 – 0/15/20-percent gain taxed at 15% 7,600 1,140.00 0/15/20-percent gain taxed at 20% – – 25-percent gain taxed at 25% – – 28-percent gain taxed at 28% – – Federal income tax liability 47,600.00 1,400.00 QUIZ II – CASE 1 INSTRUCTIONS: TAXPAYER INFORMATION Marital status Single Ordinary income before capital gains (losses) 160,700 For AGI deductions None Itemized deductions None Standard deduction 12,400 QBID None Tax credits None SALES DATA CHARACTER CHECK TOTALS Description Date Purchased Date Sold Adjusted Basis Amount Realized Holding Type Gain (Loss) Stock A 6/1/2019 1/2/2020 18,000 6,000 ST 15 (12,000) ST 15 (11,000) – Stock B 1/15/2017 11/30/2020 11,000 336,100 LT 15 325,100 LT 28 10,000 – Stock C 2/1/2020 6/15/2020 200 1,200 ST 15 1,000 LT 25 30,000 – Stock D 7/14/2012 9/5/2020 22,000 16,000 LT 15 (6,000) LT 15 319,100 – Antiques 3/1/1994 7/1/2020 20,000 30,000 LT 28 10,000 Rental property 1 8/15/2010 4/22/2020 69,000 99,000 LT 25 30,000 Using the taxpayer information and sales data below, net any capital gains and losses, apply the capital gain netting process, use the tax formula to determine the taxable income, and calculate the taxpayer’s tax liability for the 2020 taxable year. Note that all gain realized on the sale of the rental property is 25 percent rate gain . See the sample solution provided for the recommended presentation. Your solution must show the netting process and tax liability calculations. Solutions that do not show work will not be awarded credit. QUIZ II – CASE 2 INSTRUCTIONS: TAXPAYER INFORMATION Marital status Married Filing Jointly Ordinary income before capital gains (losses) 339,400 For AGI deductions None Itemized deductions None Standard deduction 24,800 QBID None Tax credits None SALES DATA CHARACTER CHECK TOTALS Description Date Purchased Date Sold Adjusted Basis Amount Realized Holding Type Gain (Loss) Stock A 6/1/2019 1/2/2020 7,500 11,000 ST 15 3,500 ST 15 (2,000) – Stock B 1/15/2016 11/30/2020 9,000 185,000 LT 15 176,000 LT 28 1,000 – Stock C 2/1/2020 6/15/2020 8,200 2,700 ST 15 (5,500) LT 25 40,000 – Stock D 7/14/2012 9/5/2020 7,500 2,500 LT 15 (5,000) LT 15 171,000 – Antiques 3/1/1993 7/1/2020 20,000 21,000 LT 28 1,000 Rental property 1 8/15/2009 4/22/2020 110,000 150,000 LT 25 40,000 Using the taxpayer information and sales data below, net any capital gains and losses, apply the capital gain netting process, use the tax formula to determine the taxable income, and calculate the taxpayer’s tax liability for the 2020 taxable year. Note that all gain realized on the sale of the rental property is 25 percent rate gain . See the sample solution provided for the recommended presentation. Your solution must show the netting process and tax liability calculations. Solutions that do not show work will not be awarded credit.

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