Question

Margot and Johnny; calendar year, cash basis taxpayers; file a joint return. Before any of the capital asset transactions below, their taxable income is $90,100 and consists entirely of wages from their current jobs. During the year, they also had the following capital asset transactions:
. On February 1, 2018, they purchased Wal-Mart common stock for $57,000. They sold the stock on May 31, 2020 for $65,000.
. On August 15, 2019, they purchased PG&E common stock for $42,000. They sold the stock on July 25, 2019 for $35,000.
. On April 25,2017, they purchased Cisco common stock for $87.500. They sold the stock on May 21, 2019 for $100,000.
What is their final taxable income after including the capital asset transactions, and what is their total tax liability?
a. 5103,600 taxable income: $11,539 tax liability.
b. 5107,600 taxable income: $14,209 tax liability.
c. 5107,600 taxable income; $23,672 tax liability.
d. 5103,600 taxable income; 513,564 tax liability.

Answer 1

Answer:

c. $107,600 taxable income: $23,672 tax liability.

Explanation:

Taxable Income calculation:

Taxable Income beginning $90,100

Add: gain on sales on Wal-Mart stock $13,000

Less: Loss on sale of PG&E stock $7,000

Add: Gain on Cisco common stock $11,500

Taxable Income at end $107,600