Maloney, Young, Nellen, & Persellin, CPAS5191 Natorp BoulevardMason, OH 45040March 17, 2021Ms. Elaine Case300 Ireland AvenueShepherdstown, WV 25443Dear Ms. Case:The purpose of this letter is to discuss the result of your stock transactions for 2020.You had $net ofcapital gains and $ofcapital losses. Subtracting the $of losses from the $ofresults in a $netcapital gain.The $netcapital gain and the details of your stocktransactionsv be reported on the Schedule D attached to your Form1040. The $net capitalv for the alternativetax on capital gains and will be taxed at a% rate, rather than at yourmarginal tax rate of 37%.Thank you for the opportunity to be of service. Please call me if you have additionalquestions.Sincerely,Michelle Brown, CPAPartner Problem 14-57 (LO. 5)Elaine Case (single with no dependents) has the following transactions in 2020:AGI (exclusive of capital gains and$540,000losses)Long-term capital gain22,000Long-term capital loss(8,000)Short-term capital gain19,000Short-term capital loss(23,000)a. What is Elaine's net capital gain or loss?Elaine has a net long-term capital gainof $and a net short-term capitalof $. As a result, she has an overall net capitalof $b. Complete the letter to Elaine describing how the net capital gain or loss will be treated onher tax return. Note that Elaine's income from other sources puts her in the 37% taxbracket. If required, round your answer to one decimal place.

A long term capital gain or losses is the gain or loss arising from the sale of qualifying asset or investment that has been owned for longer than twelve months at the time of sale whereas short term gain or losses are those which arises from sale or disposal of asset or investments in less than twelve months. Internal Revenue Service (IRS) assigns a lower tax rate to long-term capital gains than a short term capital gains. Long-term capital losses can be set off. only against long- term capital gains whereas short-term capital losses can be set off from both long-term and short-term capital gains.Calculation of Elaine's net capital gain or loss Long term capital gain $22,000 Less : Long term capital loss ($8,000) Net long term capital gain $14,000 Short term capital gain $19,000 Less: Short term capital loss ($23,000) Net short term capital loss ($4,000) As short-term losses can be set off against long-term gains as well as short-term gains from any capital asset. In this case, it will be set off long-term gains. Net Long-term capital gain $14,000 Less : Short-term capital loss ($4,000) Long-term capital gains $10,000 Taxable Income : Adjusted Gross Income $540,000 Add :Long-term capital gain (Net) $10,000 Taxable Income $550,000 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. Maloney ,Young, Nellen, & Persellin ,CPAs 5191 Natorp Boulevard Mason ,OH 45040 March 17,2021 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 2020. You had $14,000 net of long-term capital gains and $4,000 of short-term capital losses. Subtracting the $4,000 of losses from the $14,000 of gains results in a $10,000 net long-term capital gain. The $10,000 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 $10,000 net capital long-term gain qualifies for the alternative tax on capital gains and will be taxed at a 20% rate ,rather than at your marginal tax rate of 37%. Thank you for the opportunity to be of service. Please call me if you have additional questions. Sincerely, Michelle Brown ,CPA Partner

Business

Accounting

Problem 14-57 (LO. 5) Elaine Case (single with no dependents) has the following transactions in 2020: AGI (exclusive of capital gains and $540,000 losses) 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. What is Elaine's net capital gain or loss? Elaine has a net long-term capital gain of $ and a net short-term capital of $ . As a result, she has an overall net capital of $ b. Complete the letter to Elaine describing how the net capital gain or loss will be treated on her tax return. Note that Elaine's income from other sources puts her in the 37% tax bracket. If required, round your answer to one decimal place.

Problem 14-57 (LO. 5) Elaine Case (single with no dependents) has the following transactions in 2020: AGI (exclusive of capital gains and $540,000 losses) 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. What is Elaine's net capital gain or loss? Elaine has a net long-term capital gain of $ and a net short-term capital of $ . As a result, she has an overall net capital of $ b. Complete the letter to Elaine describing how the net capital gain or loss will be treated on her tax return. Note that Elaine's income from other sources puts her in the 37% tax bracket. If required, round your answer to one decimal place.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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