During 2023, your clients, Mr. and Mrs. Howell, owned the following investment assets: Investment Assets Date Acquired Purchase Price Broker's Commission Paid at Time of Purchase 300 shares of IBM common (NYSE: IBM) 11/22/2020 $ 10,350 $ 100 200 shares of IBM common (NYSE: IBM) 4/3/2021 43,250 300 3,000 shares of Apple preferred (NASDAQ: AAPL) 12/12/2021 147,000 1,300 2,100 shares of Cisco common (NASDAQ: CSCO) 8/14/2022 52,500 550 420 shares of Vanguard mutual fund 3/2/2023 14,700 No-load fund* *No commissions are charged when no-load mutual funds are bought and sold. Because of the downturn in the stock market, Mr. and Mrs. Howell decided to sell most of their stocks and the mutual fund in 2023 and to reinvest in municipal bonds. The following investment assets were sold in 2023: Investment Assets Date Sold Sale Price Broker's Commission Paid at Time of Sale 300 shares of IBM common 5/6 $ 13,700 $ 100 3,000 shares of Apple preferred 10/5 221,400 2,000 2,100 shares of Cisco common 8/15 63,250 650 451 shares of Vanguard mutual fund 12/21 15,700 No-load fund* *No commissions are charged when no-load mutual funds are bought and sold. The Howells' broker issued them a Form 1099-B showing the sales proceeds net of the commissions paid. For example, the IBM sales proceeds were reported as $13,600 on the Form 1099-B they received. In addition to the sales reflected in the table above, the Howells provided you with the following additional information concerning 2023: The Howells received a Form 1099-B from the Vanguard mutual fund reporting a $900 long-term capital gain distribution. This distribution was reinvested in 31 additional Vanguard mutual fund shares on 6/30/2023. In 2017, Mrs. Howell loaned $6,000 to a friend who was starting a new multilevel marketing company called LD3. The friend declared bankruptcy in 2023, and Mrs. Howell has been notified she will not be receiving any repayment of the loan. The Howells have a $2,300 short-term capital loss carryover and a $4,800 long-term capital loss carryover from prior years. The Howells did not instruct their broker to sell any particular lot of IBM stock. The Howells earned $3,000 in municipal bond interest, $3,000 in interest from corporate bonds, and $4,000 in qualified dividends. Assume the Howells have $130,000 of wage income during the year. a-3. Compute the Howells' tax liability for the year (ignoring the alternative minimum tax and any phase-out provisions) assuming they file a joint return, they have no dependents, they don't make any special tax elections, and their itemized deductions total $30,000. (Use the tax rate schedules, Dividends and Capital Gains Tax Rates.)

Calculating the Howells' tax liability involves several steps: 1. Calculate Capital Gains/Losses: The Howells sold several stocks and mutual funds in 2023. The capital gain or loss for each sale is calculated as the sale price minus the purchase price and broker's commissions. The Howells also received a $900 long-term capital gain distribution from the Vanguard mutual fund. Additionally, they have a $2,300 short-term capital loss carryover and a $4,800 long-term capital loss carryover from prior years. 2. Bad Debt Deduction: Mrs. Howell's $6,000 loan to a friend that was not repaid can be claimed as a short-term capital loss. 3. Calculate Total Income: The Howells' total income includes their wage income, municipal bond interest, corporate bond interest, qualified dividends, and net capital gains. 4. Calculate Adjusted Gross Income (AGI): The Howells' AGI is their total income minus any adjustments. In this case, there are no adjustments mentioned. 5. Calculate Taxable Income: The Howells' taxable income is their AGI minus their itemized deductions. 6. Calculate Tax Liability: The Howells' tax liability is calculated based on their taxable income and the tax rate schedules. Qualified dividends and long-term capital gains are taxed at a lower rate. Without specific numbers for the capital gains/losses and the total income, it's not possible to provide an exact tax liability. However

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