2008 Capital Gains

[Snaggletooth]

carrying 0% tax rate. Will this survive and be available for 2008 returns?

Example:
Farmer has $30,000 in wages, interest, farm rent AFTER std deductions and exemptions, and is in the 15% tax bracket. He then sells land at a gain for $500,000. Which of the following is correct?

A. His AGI swells up to $530,000, and a 35% rate is thus applied to his $30,000 in wages, interest, and farm rent. But his $500,000 is taxed at 0% since he was in the 15% bracket aside from the sale. Phaseouts are not applied since most of the income is capital gains.

B. His AGI swells up to $530,000, and a 35% rate is thus applied to his $30,000 in wages, interest, and farm rent. Since he has moved into the 35% bracket, the land sale is taxed at the 15% ceiling. Phaseouts are not applied since most of the income is capital gains.

C. Same as B above except phaseouts must be also be applied if triggered by the high income.

[DonPriebe]

None of the above

carrying 0% tax rate. Will this survive and be available for 2008 returns?

Example:
Farmer has $30,000 in wages, interest, farm rent AFTER std deductions and exemptions, and is in the 15% tax bracket. He then sells land at a gain for $500,000. Which of the following is correct?

A. His AGI swells up to $530,000, and a 35% rate is thus applied to his $30,000 in wages, interest, and farm rent. But his $500,000 is taxed at 0% since he was in the 15% bracket aside from the sale. Phaseouts are not applied since most of the income is capital gains.

B. His AGI swells up to $530,000, and a 35% rate is thus applied to his $30,000 in wages, interest, and farm rent. Since he has moved into the 35% bracket, the land sale is taxed at the 15% ceiling. Phaseouts are not applied since most of the income is capital gains.

C. Same as B above except phaseouts must be also be applied if triggered by the high income.

D. None of the above.

First his AGI increases from the sale. This subjects his exemptions to phase out, increasing his ordinary taxable income (not counting the capital gains) above the previous $30,000.

He is taxed on that ordinary income as if it were his only income (i.e. in the 15% part of the table.)

Then, to the extent that that ordinary taxable amount is below the top of the 15% bracket, some of his capital gains is taxed at 0%. The remaining portion of the capital gains is taxed at 15%.

Then he gets to worry about the AMT, and maybe looks at income averaging for farmers.

With any luck, the capital gains worksheet for a MFJ example is posted at www.w2in.com/CG.pdf

[Black Bart]

Well gosh, Snag

D. None of the above...

Here I was puzzlin' and pokin' at your projected problem thingy -- tryin' to figure "Is this this way? Is it that way?" and all like that when out of the blue, one bold stroke of that New York boy's terrible swift smarts wiped out the question. Discouragin', ain't it?

Tell you what (and I apologize in advance for generalizin'), granny was right when she said "Those little fellers from up North know lotsa stuff." You remember the other day when I made that long-winded post about whether the late filin' penalty started on 4-15 or 10-15 if they missed filin' by extension date? Well, we ran it up to a 20-post two-page seminar (really wrung it out) and even did some light intellectual liftin' there 'til some well-versed taxperson (I bet he was from New York too) string-zinged us with a one-paragraph, on-the-money IRS pub cite and sunk the whole shebang. Talk about a letdown -- drastic problems call for drastic solutions, so right after October 15th I'm buyin'' a lifetime subscription to either TTB or Playboy (cain't decide which).

Well, anyway, call me for empathy/sympathy. Maybe if we stick to 1040As...

________________________________
"It's about NOTHING!" -- George Costanza -- Re: Seinfeld show theme/content

[Nashville]

Yeh, They're Smart

The New York fellers are out there to keep us straight. I'm starting to see more 'n more of them here in the South. They're smart enough to come down, and then they just stay and don't go back. Snag shoulda knowed better, I think the "push up" factor applies to the AMT and not necessarily the Sch D tax worksheet. The zero percent is new, and apparently extends only so far up the income ladder.

Priebe is one of those guys you're talking about. When he jumps in, he is very knowledgeable and helpful. And whereas we think of New York as being Yankee Stadium and the Empire State Building, this is quite a misconception to extend this image beyond the five boroughs.

I've been all over New York, and 99% of it is covered with either rolling hills or mountains. Poverty for the most part limited to the large towns, the countryside sparkles with agriculture and picturesque scenery. Can be cold and miserable in winter with lots of lake effect snow - anyone who has ever been stationed at Ft. Drum/Watertown can vouch for that.

Shows how easy a dreamy guy can wander from tax topics. At any rate, glad to have Don Priebe any time he joins us from the Rochester/Finger Lakes area. Don, condolences if you happen to be a Syracuse fan.

[DonPriebe]

Thank you kindly sirs

... when out of the blue, one bold stroke of that New York boy's terrible swift smarts wiped out the question. ...

I ain't been a boy for some time now. "None of the above" also refers to the color of my hair. And I knew the answer cause I teach them AARP fellas how to do taxes for the rest of us old folks. In this locality we're all retired engineers so we gotta know WHY.

At any rate, glad to have Don Priebe any time he joins us from the Rochester/Finger Lakes area. Don, condolences if you happen to be a Syracuse fan.

Yup, live just outside Syracuse. I go up on campus about once a week, but not on game nights. Parking is just too much of a hassle.