Answered: Please calculate the 2022 tax liability…

Business

Accounting

Please calculate the 2022 tax liability for a single taxpayer who is 40 years old with $222,950 of wages, $20,000 of

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter4: Managing Income Taxes

Section: Chapter Questions

Problem 1DTM

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Please calculate the 2022 tax liability for a single taxpayer who is 40 years old with $222,950 of wages, $20,000 of qualified dividends, $30,000 of LT capital gains and $40,000 of ST capital gains. Please make sure to consider all possible taxes in your calculation, prepare your calculation in Excel and show all work.

The taxpayer will not be subject to AMT so that calculation is not necessary.

Definition Definition Increase in the value of a capital asset and the amount that is realized when the asset is sold off. A capital gain may be short-term or long-term depending on the tenure for which the asset is held.

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