Question

Braden is in the 12% marginal tax bracket with a taxable income of $36,000 for the year. In addition, Braden has a $500 long-term capital gain on bonds he sold this year. If the $500 were taxed as ordinary income, Braden would remain in the 12% rate bracket.

Since it is a long-term capital gain on security sales, Braden will pay tax of __________ on this income.
If the $500 gain was on collectibles, taxed at a maximum 28%, Braden would incur tax of $_______on this income.

(a) 0,60

(b) 60, 0

(c) 15, 140

(d) 140, 15

Answer 1

Braden would pay a tax of $60 on the long-term capital gain if it is taxed as ordinary income, and $140 if it is considered a gain on collectibles.

Step-by-step explanation:

To calculate the tax on the $500 long-term capital gain, we need to determine the tax rate applicable to Braden's taxable income. Based on the information provided, Braden is in the 12% marginal tax bracket with a taxable income of $36,000. If the $500 gain were taxed as ordinary income, Braden would remain in the 12% bracket. Therefore, the tax on the $500 long-term capital gain would be 12% of $500, which is $60.

If the $500 gain were on collectibles, taxed at a maximum 28%, Braden would incur tax of 28% of $500, which is $140.