During the year Isabelle recorded the following transactions

During the year, Isabelle recorded the following transactions involving capital assets. Indicate the tax treatment for each item: Transaction Amount Tax Treatment Loss on the sale of land held for investment (purchased 11 months ago) ($8,000) Short-term capital loss Gain on the sale of a personal speed boat (purchased seven years ago) 4,500 Long-term capital gain Gain on the sale of corporate stock (purchased four years ago as an investment) 12,500 Long-term capital gain Loss on the sale of a personal vehicle (purchased nine months ago) (3,500) Not deductible Overall, Isabelle has of $ and of $ . a. If Isabelle is in the 35% Federal income tax bracket, how much tax results? $ b. If Isabelle is in the 15% bracket? $

Solution

Tax treatment

a) Calculation of the Tax Results with 35% Federal Income Tax Bracket:

Tax = -$8,000 + $4,500 + $12,500 - $3,500

= $5,500 * 35%

= $1,925

Therefore, the Tax is $1,925, with 35% Federal Income Tax Bracket.

b) Calculation of the Tax Results with 15% Federal Income Tax Bracket:

Tax = -$8,000 + $4,500 + $12,500 - $3,500

= $5,500 * 15%

= $825

Therefore, the Tax is $825, with 15% Federal Income Tax Bracket.