Question

If an individual taxpayer's marginal tax rate is 33% and he holds the following assets for more than a year, which gains will be taxed at the lowest rat eat the time of sale?

A. gains from a work of art
B. gains from personal-use property
C. gains from a coin collection
D. gains attributable to tax depreciation taken on real property
E. None of the above

Answer 1

Gains attributable to tax depreciation on real property would be taxed at the lowest rate of 25% due to the unrecaptured Section 1250 gain, as opposed to the maximum 28% for the sale of collectibles such as art or coins.

Step-by-step explanation:

If an individual taxpayer's marginal tax rate is 33%, and they hold various assets for more than a year, it's important to understand how different gains are taxed at the time of the sale. Gains from the sale of collectibles, such as art, coins, and personal property, are generally taxed at a maximum rate of 28%. In contrast, gains from depreciable real property are taxed at 25% if they are attributable to depreciation recapture. The lower rate for depreciable real property is due to the special rate for unrecaptured Section 1250 gain. Therefore, among the options given, the gains that will be taxed at the lowest rate at the time of sale would be gains attributable to tax depreciation taken on real property (option D).