Steve and Jennifer Are in the 33% Tax Bracket for Ordinary

question 141

Essay

Steve and Jennifer are in the 33% tax bracket for ordinary income and the 15% bracket for capital gains.They have owned several blocks of stock for many years.They are considering the sale of two blocks of stock.The sale of one would produce a gain of $12,000 while the sale of the other would produce a loss of $18,000.For purposes of this problem,ignore personal exemptions,itemized deductions,phase-outs and additional investment taxes.They have no other gains and losses this year.
a.How much tax will they save if they sell the block of stock that produces a loss?
b.How much additional tax will they pay if they sell the block of stock that produces a gain?
c.What will be the impact on their taxes if they sell both blocks of stock?

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Definitions:

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