Question

Bridget, a single taxpayer, sold a building used in her business during the current year. The realized gain on the sale was $135,000. Of this amount, $95,000 is unrecaptured Section 1250 gain. How will Bridget be taxed on this gain assuming her marginal tax rate is 32 percent and her LTCG rate is 15%?

Answer 1

Answer:

$95,000 will be taxed at 25% and $40,000 will be taxed at 15%

Explanation:

(See attachment below for Long-term capital gains tax rate)

Depending on income and marital status, the long-term capital gains tax rates are 0%, 15% and 20% respectively.

Bridget is single and her realised gain is $135,000

Out of which $95,000 is unrecaptured Section 1250 gain.

The capital gain attracts 15%

(See attachment below)

The capital gain is calculated as

$135,000 - $95,000 = $40,000

The $95,000 will be taxed at 25% under the unrecaptured Section 1250 gain.