Question

Clarice became very ill in August of 2019 and was unable to work the rest of the year. She had only $30,000 of income from her job for the time she worked and was forced to sell the following investments to pay for her living expenses. She sold 10,000 shares of BBC stock purchased two years ago for $34,000 (basis= $16,000) and a coin collection she inherited from her grandfather many years ago for $55,000 (basis = $30,000). If Clarice is single and has no dependents, determine her taxable income and her income tax liability for 2011.

Answer 1

total taxable income = $73,000

tax liability = $7,505

Step-by-step explanation:

Clarice's ordinary income $30,000

Clarice's capital gains:

• selling of stock = $34,000 - $16,000 = $18,000
• selling of coin collection = $55,000 - $30,000 = $25,000
• total long term capital gains = $43,000

Clarice's taxable income = $73,000

Clarice's ordinary income tax rate 2011:

ordinary income = $30,000 - standard deduction $5,800 = $24,200

• 10% on taxable income from $0 to $8,500 = $850
• 15% on taxable income over $8,500 to $34,500 = $2,355

ordinary income taxes = $3,205

Clarice's capital gains tax rate 2011 = 10%

capital gains taxes = $43,000 x 10% = $4,300

total tax liability = $7,505