Question

Matt and Meg Comer are married and file a joint tax return. They do not have any children. Matt works as a history professor at a local university and earns a salary of $64,000. Meg works part-time at the same university. She earns $31,000 a year. The couple does not itemize deductions. Other than salary, the Comers’ only other source of income is from the disposition of various capital assets (mostly stocks). (Use the tax rate schedules.) (Round final answers to the nearest whole dollar amount.)What is the Comers’ tax liability for 2018 if they report the following capital gains and losses for the year?Short-term capital gains $ 9,000 Short-term capital losses (2,000 )Long-term capital gains 15,000 Long-term capital losses (6,000 )

Answer 1

Comer's tax liability for 2018 = $33300

Step-by-step explanation:

Before determining Comer's tax liability for 2018, we need to understand what gross income is and what forms part of gross income. Gross income is total amount of income from various sources minus/plus and additions and deductions. Income from salary is earned in the ordinary course of work/business which is definitely part of gross income. Capital gain is refers to gain/profit/income from sale of capital assets such as property, shares, stocks, piece of land. Any gains and losses form part of gross income and capital losses are reported as deductions meant to reduce investors tax liability just as capital gains should be taxed.

Lets first calculate gross income and then apply tax rate to determine tax liability.

Gross income = salary + Short-term & long-term capital gains - short-term & long-term capital losses

GI = $64000 + $31000 + $9000+$15000 -$2000 -$6000

GI = $111000

Assuming the tax rate is 30%, the tax liability for the year is as follows:

Tax liability = $111000×30%

Tax liability = $33300