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ACC 547 Week 2 Problem Set I5-67, I5-61

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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