Final answer:
Gains from personal-use property are likely to be taxed at the taxpayer's ordinary income rate of 35%, making it the highest rate among the options listed. Investment land, collectibles, and qualified small business stock generally benefit from lower long-term capital gains rates, while depreciation recapture is capped at 25%.
Step-by-step explanation:
The question asks which gain from various asset types held for more than one year by an individual taxpayer with a marginal tax rate of 35 percent would be taxed at the highest rate upon sale. Generally, long-term capital gains are taxed at lower rates than ordinary income, but there are exceptions.
- Investment land and personal-use property generally result in capital gains taxed at preferred long-term capital gains rates, which for most taxpayers is less than their ordinary income tax rate.
- Coin collections, being collectibles, are typically taxed at a maximum 28% rate for long-term gains, which is lower than the 35% marginal rate.
- Qualified small business stock (QSBS) held for more than 5 years may be eligible for a 100% exclusion on capital gains up to a certain limit under Internal Revenue Code Section 1202, which would result in no tax.
- The gain attributable to tax depreciation taken on real property (also known as depreciation recapture) is generally taxed as ordinary income up to a maximum of 25%, thus below the 35% rate.
Considering the options provided and the information regarding taxation of various gains, gains from personal-use property would generally be taxed at the taxpayer's marginal rate if it doesn't qualify for a capital gains tax rate, which could make it the highest taxed gain among the choices.