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(Answered) Scenarios regarding capital gain tax


1. Betty incurs the following transactions during the current year. Without considering the;transactions, her 2006 AGI is $40,000. Analyze the transactions and answer the following;questions;? On March 10, 2006, she sells a painting for $2,000. Betty is the artist, and she completed;the painting in 2001. Her basis for the painting is $50.;? On June 18, 2006, she receives $28,500 from the sale of stock purchased by her uncle;in 1996 for $10,000, which she inherits on February 20, 2006, as a result of her;uncle's death. The stock's FMV on that date is $30,000.;? On July 30, 2006, she sells land for $25,000 that was received as a gift from her;brother on April 8, 2006, when the land's FMV was $30,000. Her brother purchased;the land for $43,000 on October 12, 1998. No gift tax was paid.;a. What is her NSTCL or NSTCG?;b. What is her NLTCL or NLTCG?;c. What is the effect of capital gains and losses on her AGI?;d. What is her capital loss carryforward to 2007?;2. As a political consultant for an aspiring politician, you have been hired to evaluate the;following statements that pertain to capital gains and losses. Evaluate the statement and;provide at least a one-paragraph explanation of each statement. As you prepare your;answer, consider the fact that the aspiring politician does not have much knowledge;about taxation.;a. The tax on capital gains is considered a voluntary tax.;b. On October 22, 1986, the Tax Reform Act of 1986 was passed, which eliminated the;60% of net capital gain deduction (i.e., an individual taxpayer with $10,000 of net;capital gain was entitled to a $6,000 deduction when computing AGI) before January;1, 1987. Many state governments enjoyed a substantial increase in 1986 tax revenue.;c. High-income taxpayers receive the most benefit from preferential treatment for capital;gains.
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Scenarios regarding capital gain tax

 


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