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Week 2 Case Study I5-67 As a political consultant for an aspiring politician, you have been hired to evaluate thefollowing statements that pertain to capital gains and losses. Evaluate the statement andprovide at least a oneparagraph explanation of each statement. As you prepare youranswer, consider the fact that the aspiring politician does not have much knowledgeabout 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 the60 % of net capital gain deduction( i. e., an individual taxpayer with $ 10,000 of netcapital gain was entitled to a $ 6,000 deduction when computing AGI) before January1, 1987. Many state governments enjoyed a substantial increase in 1986 tax revenue.
� c. High-income taxpayers receive the most benefit from preferential treatment for capitalgains. Comprehensive Problem I5-61 Betty incurs the following transactions during the current year. Without considering thetransactions, her 2006 AGI is $ 40,000. Analyze the transactions and answer the follow-ing questions:
• On March 10, 2006, she sells a painting for $ 2,000. Betty is the artist, and she com-pleted 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 unclein 1996 for $ 10,000, which she inherits on February 20, 2006, as a result of heruncle’ 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 herbrother on April 8, 2006, when the land’ s FMV was $ 30,000.