Below is a table with four different scenarios for a taxpayer who opts to sell several...

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Accounting

Below is a table with four different scenarios for a taxpayerwho opts to sell several different types of stock throughout theyear. Assume that all ordinary income for the taxpayer is taxed ata flat tax rate of 22%. In contrast, his long-term capital gainstax rate is 15%. His only income outside the transactions with thestock is $100,000 or ordinary income from his salary.(Assume the tax year is 2020).
Scenario 1
Scenario 2
Scenario 3
Scenario 4
ST capital gain
$4,000
$4,000
$4,000
ST capital loss
$7,000
$7,000
$10,000
LT capital gain
$9,000
$9,000
$9,000
LT capital loss
$5,000
$5,000
$5,000
a. What is the total amount of taxes saved during the currentyear because of the capital losses in Scenario 1?
b. What is the additional amount of tax due the taxpayer mustpay in total this year because of the capital gains in Scenario2?
c. What is the total change in tax due for the taxpayer becauseof the gains and losses in Scenario 3?
d. What is the total change in tax due for the taxpayer becauseof the gains and losses in Scenario 4?

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3.6 Ratings (506 Votes)

IN SCENARIO 1 INCOME OTHER THAN STOCKS INCOME 100000 LESS SHORT TERM CAITAL LOSS 7000 LONG TERM CAPITAL LOSS 5000 TOTAL INCOME 88000 TAX IMPLICATION TAX ON INCOME OTHER THAN STOCKS 10000022 22000 See Answer

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	Scenario 1	Scenario 2	Scenario 3	Scenario 4
ST capital gain		$4,000	$4,000	$4,000
ST capital loss	$7,000		$7,000	$10,000
LT capital gain		$9,000	$9,000	$9,000
LT capital loss	$5,000		$5,000	$5,000