Problem:
During 2007, Reed had the following transactions involving capital assets:
Gain on the sale of customized ice-fishing cabin $8,000
(held for 11 months and used for recreational purposes
Loss from a garage sale (personal clothing, furniture, (6,000)
appliances held for more than a year)
Loss on the sale of GMC stock (held as an investment for (1,000)
10 months)
Gain on the sale of a city lot (held as and investment for 3,000
3 years)
a) If Reed is in the 28% tax bracket, how much income tax results?
b) If Reed is in the 15% braket?
I know that long term gains have the alternative tax computation if the tax payers regular tax bracket exceeds the applicable alternative tax, but in a) it does not.
In b) I think it drops to 5% for long term gains because he in the 15% or less category.