Answer:
$10,000
Explanation:
Eleanor's self-employment tax will require an understanding of a few points.
1. Eleanor earns $120,000 as wages working for an accounting firm therefore, this wages do not qualify for self-employment tax
2. Eleanor earns $13,000 as gross income for her own consulting service and this is self-employment income. However, $3,000 qualify as deductible expenses from the gross income. Taxable self-employment income= $13,000-$3,000= $10,000
3. Long term capital gain tax incurred = $1,000. Ordinarily the capital gain tax should increase the tax. However, its inclusion will be based on the federal government's table for calculating payment of long-term capital gain tax for 2019 based on income for the year.
Looking at the table, income from $0 Up to $39,375 will attract 0% payment of long-term capital gain tax. Since, the self-employment income of Eleanor is $10,000, no long-term capital gain tax will be incurred.
It means only the 13,000-3,000= $10,000 will be tax for self employment
