Are Form 1120 Schedule M 3 Limitations 2019-2024

Hello and welcome to the session where we will look at an example. Let's consider a taxpayer who is the head of a household and has a total taxable income of $87,200. This includes a 28% long-term capital gain of $3,428, a 28% long-term capital loss of $2,010, a 15% long-term capital gain of $62,000, and a short-term capital loss of $1,200. We need to calculate the taxpayer's taxable income and determine the taxes owed. First, we need to find out the taxpayer's ordinary income. This can be calculated by subtracting the capital gains and losses from the total taxable income. So, we can start by subtracting $3,428, $2,010, $62,000, and $1,200 from $87,200. This gives us a result of $60,200 as the ordinary income. Next, we need to calculate the taxes on this ordinary income. Since the taxpayer is the head of a household, we will refer to the tax schedule for head of household filing status. For the taxable income of $27,000, the tax owed would be calculated as follows: $12,950 (the starting point for the 15% tax bracket) + 15% of the amount over $12,950. So, for the remaining $14,050 ($27,000 - $12,950), the tax owed would be 15% of $14,050, which is $2,107.50. Adding this to the base tax of $1,295, the total tax on the ordinary income would be $3,402.50. Moving on to the next component, the net long-term capital gain of $200. Since the taxpayer's ordinary income tax rate is 15%, the taxes on this gain will also be at the 15% rate. Multiplying $200 by 15%, we get $30 as the tax owed on this capital gain. Lastly, we have the long-term capital gain of $62,000 and the $60,000 that is treated separately. These capital gains will push the taxpayer into a higher tax bracket. To determine the amount...