Question

During the year, Inez, a single individual, recorded the following transactions involving capital assets.

Gain on the sale of unimproved land (held as an investment for 3 years) $3,000
Loss on the sale of a camper (purchased 2 years ago and used for family vacations) (5,000)
Gain on the sale of ADM stock (purchased 9 months ago as an investment) 4,000
Gain on the sale of a fishing boat and trailer (acquired 18 months ago at an auction and used for recreational purposes)

1,000

Indicate the tax treatment for each item.

Gain on the sale of unimproved land ____________________
Loss on the sale of a camper ____________________
Gain on the sale of ADM stock ____________________
Gain on the sale of a fishing boat and trailer ____________________
Overall, Inez has ____________________ of $____________ and ______________________ of $______________.

a. If Inez is in the 32% Federal income tax bracket, how much tax results?
$_______________

b. What if Inez is in the 12% bracket, with $35,000 taxable income?
$________________

Answer 1

A.

1. Gain on the sale of unimproved land = Long-term capital gain

2. Loss on the sale of a camper = Not deductible

Losses realized from the disposition of personal-use property (property neither held for investment nor used in a trade or business) are not recognized.

3. Gain on the sale of ADM stock = Short-term capital gain

4. Gain on the sale of a fishing boat and trailer = Long-term capital gain

5. Overall, Inez has a long-term capital gain of $4,000 and a short-term capital gain of $4,000.

B.

1. 35% = tax is $2,000

2. 15%= The tax is $600