Elaine Case (single with no dependents) has the following transactions in 2016: AGI (exclusive of capital gains and losses) $240,000 Long-term capital gain 22,000 Long-term capital loss (8,000) Short-term capital gain 19,000 Short-term capital loss (23,000)
a. Elaine has a net long-term capital gain of $ 14,000 and a net short-term capital loss of $ 4,000 . As a result, she has an overall net capital gain of $ 10,000
b. Complete the letter to Elaine describing how the net capital gain or loss will be treated on her tax return. Assume Elaine's income from other sources puts her in the 39.6% bracket. If required, round your answer to one decimal place.
Hoffman, Young, Raabe, Maloney, & Nellen, CPAs
5191 Natorp Boulevard<
Mason, OH 45040 March 17, 2017 Ms. Elaine Case
300 Ireland Avenue
Shepherdstown, WV 25443 Dear Ms. Case: The purpose of this letter is to discuss the result of your stock transactions for 2016. You had $14000 of long-term capital gains and $4000 of short-term capital losses. Subtracting the $?? of losses from the $ ??? of gains results in a $??? net long-term capital gain. The $??? net long-term capital gain and the details of your stock transactions will be reported on the Schedule D attached to your Form 1040. The $ ??? net capital gain qualifies for the alternative tax on capital gains and will be taxed at a ??? % rate rather than at your marginal tax rate of ??? %. Thank you for the opportunity to be of service. Please call me if you have additional questions. Sincerely, Michelle Brown, CPA
Partner
Elaine Case (single with no dependents) has the following transactions in 2016: AGI (exclusive of capital gains and losses) $240,000 Long-term capital gain 22,000 Long-term capital loss (8,000) Short-term capital gain 19,000 Short-term capital loss (23,000)
a. Elaine has a net long-term capital gain of $ 14,000 and a net short-term capital loss of $ 4,000 . As a result, she has an overall net capital gain of $ 10,000
b. Complete the letter to Elaine describing how the net capital gain or loss will be treated on her tax return. Assume Elaine's income from other sources puts her in the 39.6% bracket. If required, round your answer to one decimal place.
| Hoffman, Young, Raabe, Maloney, & Nellen, CPAs 5191 Natorp Boulevard< Mason, OH 45040 |
| March 17, 2017 |
| Ms. Elaine Case 300 Ireland Avenue Shepherdstown, WV 25443 |
| Dear Ms. Case: |
| The purpose of this letter is to discuss the result of your stock transactions for 2016. You had $14000 of long-term capital gains and $4000 of short-term capital losses. Subtracting the $?? of losses from the $ ??? of gains results in a $??? net long-term capital gain. |
| The $??? net long-term capital gain and the details of your stock transactions will be reported on the Schedule D attached to your Form 1040. The $ ??? net capital gain qualifies for the alternative tax on capital gains and will be taxed at a ??? % rate rather than at your marginal tax rate of ??? %. |
| Thank you for the opportunity to be of service. Please call me if you have additional questions. |
| Sincerely, |
| Michelle Brown, CPA Partner |
Related questions
In December each year, Eleanor Young contributes 10% of hergross income to the United Way (a 50% organization). Eleanor, whois in the 28% marginal tax bracket, is considering the followingalternatives for satisfying the contribution.
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Eleanor has asked you to help her decide which of the potentialcontributions listed above will be most advantageous tax-wise.Evaluate the four alternatives and complete a letter toEleanor.
Determine the amount of the charitable contribution for eachoption.
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| Hoffman, Young, Raabe, Maloney, & Nellen,CPAs 5191 Natorp Boulevard Mason, OH 45040 |
| December 5, 2017 |
| Ms. Eleanor Young 2622 Bayshore Drive Berkeley, CA 94709 |
| Dear Ms. Young: |
| I have evaluated the proposed alternatives for your currentyear-end contribution to the United Way. I recommend that you sellthe Gold Corporation stock and donate the proceeds to the UnitedWay. The four alternatives are discussed below. |
| A donation of cash, the unimproved land, or the Gold stock willresult in a $ charitable contribution deduction. Donation of theBlue Corporation stock will result in only a $ charitablecontribution deduction. |
| A direct contribution of the Gold Corporation stock will be apoor decision from a tax perspective in that thedecline in value is not deductible and the amountof the charitable contribution would be $. If you sell the Goldstock and give the proceeds to United Way, the donation of theproceeds will result in a $ charitable contribution deduction. Inaddition, sale of the stock will result in a $ long-term capitalloss. If you have capital gains of $ or more this year, you can usethe entire loss in computing your current taxable income. If youhave no capital gains this year, you can deduct $ of the capitalloss this year and carry over the remaining $loss to futureyears. |
| You should make the donation in time for ownership to changehands before the end of the year. Therefore, I recommend that younotify your broker immediately so that there will be no problem incompleting the donation on a timely basis. |
| Please let me know if you have any questions or would like todiscuss my recommendation and the related analysis. Thank you forconsulting our firm on this matter. We look forward to serving youin the future. |
| Sincerely, |
| Nora Oldham, CPA |
Joseph Thompson is president and sole shareholder of JayCorporation. In December 2015, Joe asks your advice regarding acharitable contribution he plans to have the corporation make tothe University of Maine, a qualified public charity. Joe isconsidering the following alternatives as charitable contributionsin December 2015:
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Joe has asked you to help him decide which of these potentialcontributions will be most advantageous taxwise. Jay's taxableincome is $3,500,000 before considering the contribution.
Rank the four alternatives, and complete the letter to Joecommunicating your advice.
Note: The land and stock are "unrelated use property" but theyare not "tangible personal property".
Hoffman, Maloney, Raabe, & Young, CPAs |
December 10, 2015 |
Mr. Joseph Thompson |
Dear Mr. Thompson: |
I have evaluated the proposed alternatives for your 2015year-end contribution to the University of Maine. I recommend thatyou sell the Brown Corporation stock and donate the proceeds to theUniversity. The four alternatives are discussed below. |
Donation of cash, the unimproved land, or the Brown Corporationstock each will result in a $ __________ charitable contributiondeduction. Donation of the Maize Corporation stock will result inonly a $ ______________charitable contribution deduction. |
You will benefit in two ways if you sell the Brown Corporationstock and give the $ __________in proceeds to the University.Donation of the proceeds will result in a $ ___________charitablecontribution deduction. In addition, sale of the stock will resultin a $ _________ long-term capital ______________. If JayCorporation had capital __________________of at least $ ___________and paid corporate income tax in the past three years, the entire_______________could be ________________and Jay would receive taxrefunds for the carryback years. If Jay Corporation_______________capital gains in the carryback years, the capitalloss could be carried forward and offset against capital gains ofthe corporation for up to _______________years. |
Jay Corporation ________________ make the donation in time forthe ownership to change hands before the end of the year.Therefore, I recommend that you notify your broker immediately sothat there will be no problem in completing the donation on atimely basis. |
I will be pleased to discuss my recommendation in further detailif you wish. Please call me if you have questions. Thank you forconsulting my firm on this matter. We look forward to serving youin the future. |
Sincerely, |
Richard Stinson, CPA |
