Question

In 2022, Tom and Alejandro Jackson (married filing jointly) have $268,000 of taxable income before considering the following events: (Use the dividends and capital gains tax rates and tax rate schedules.)

On May 12, 2022, they sold a painting (art) for $118,500 that was inherited from Grandma on July 23, 2020. The fair market value on the date of Grandma's death was $94,250, and Grandma's adjusted basis of the painting was $26,700.

They applied a long-term capital loss carryover from 2021 of $10,850.

They recognized a $12,425 loss on the 11/1/2022 sale of bonds (acquired on 5/12/2012).

They recognized a $4,510 gain on the 12/12/2022 sale of IBM stock (acquired on 2/5/2022).

They recognized a $19,040 gain on the 10/17/2022 sale of rental property (the only §1231 transaction), of which $9,360 is reportable as gain subject to the 25 percent maximum rate and the remaining $9,680 is subject to the 0/15/20 percent maximum rates (the property was acquired on 8/2/2016).

They recognized a $12,850 loss on the 12/20/2022 sale of bonds (acquired on 1/18/2022).

They recognized a $7,425 gain on the 6/27/2022 sale of BH stock (acquired on 7/30/2013).

They recognized an $11,850 loss on the 6/13/2022 sale of QuikCo stock (acquired on 3/20/2015).

They received $840 of qualified dividends on 7/15/2022.

After completing the required capital gains netting procedures, what will be the Jacksons' 2022 tax liability?

Answer 1

To calculate the Jacksons' 2022 tax liability, one must determine their net capital gains by offsetting gains with losses and applying a capital loss carryover. Then, add taxable capital gains to the Jacksons' other taxable income and apply the appropriate tax brackets and rates. An exact figure for the tax liability cannot be calculated without further information on deductions and credits.

Step-by-step explanation:

Calculating Capital Gains and Tax Liability

To calculate the Jacksons' 2022 tax liability, one must first determine their capital gains or losses from the sale of assets and apply any relevant carryovers. The provided information allows for the following calculations:

• Sale of painting: Capital gain of $24,250 ($118,500 sale price - $94,250 fair market value).
• Long-term capital loss carryover: $10,850.
• Sale of bonds (11/1/2022): Capital loss of $12,425.
• Sale of IBM stock: Short-term capital gain of $4,510.
• Sale of rental property: Section 1231 capital gain of $19,040, with $9,360 taxed at 25% and $9,680 taxed at long-term capital gains rates.
• Sale of bonds (12/20/2022): Short-term capital loss of $12,850.
• Sale of BH stock: Long-term capital gain of $7,425.
• Sale of QuikCo stock: Long-term capital loss of $11,850.
• Qualified dividends: $840, taxed at long-term capital gains rates.

After offsetting capital gains with capital losses and applying the loss carryover, the taxable capital gains must be added to the Jacksons' other taxable income to compute their total taxable income. The calculation of their tax liability would involve applying relevant tax brackets and rates, as specified in the Internal Revenue Service tax tables. It is not possible to provide an exact figure for the Jacksons' tax liability without additional information such as their deductible expenses and tax credits.

Answer 2

To calculate the Jacksons' 2022 tax liability, we tally their long-term capital gains and losses, including the loss carryover, and add qualified dividends to their taxable income. The net long-term capital gain is $7,250, and the total taxable income inclusive of gains and dividends is $276,090.

Step-by-step explanation:

To determine the Jacksons' 2022 tax liability, we need to calculate their capital gains and losses and incorporate their qualified dividends into their taxable income, according to the tax brackets and capital gains tax rates for 2022.

The sale of the inherited painting resulted in a long-term capital gain of $24,250 ($118,500 sale price - $94,250 fair market value at inheritance). They also recognized long-term capital gains from the sale of IBM stock ($4,510), rental property matching the 25% maximum rate portion ($9,360), rental property matching the 0/15/20% rates portion ($9,680), and BH stock ($7,425). They reported long-term capital losses from the bond sales ($12,425 and $12,850), and stock sale ($11,850), as well as a long-term capital loss carryover from 2021 ($10,850).

Their net long-term capital gain is the sum of the gains minus the losses and the loss carryover:

Net long-term capital gain = $24,250 (painting) + $4,510 (IBM stock) + $9,360 (rental property 25% rate) + $9,680 (rental property 0/15/20% rate) + $7,425 (BH stock) - $12,425 (bonds 11/1) - $12,850 (bonds 12/20) - $11,850 (QuikCo stock) - $10,850 (loss carryover) = $7,250.

The qualified dividends of $840 are also taxed at the long-term capital gains rate. Their total taxable income, including the net capital gain and dividends is $268,000 + $7,250 + $840 = $276,090.

The tax liability calculations must account for the different rates applicable to ordinary income, qualified dividends, and long-term capital gains, as well as the progressive nature of tax brackets for filing jointly.