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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Why does the worksheet for 2007 Schedule D direct you to multiple

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Why does the worksheet for 2007 Schedule D direct you to multiple the amount of gain on line 32 by 28% i8f the rate for long term capital gain is 15%?
Hello muffin,

Not all portions of a long term gain are subject to the 15% rate.

In the case of investment property which was sold, a portion of the gain is a result of recapture of the depreciation. That portion which is attributable to the depreciation recapture is taxed at 28% and does not qualify for the 15% rate.

Line 32 only takes in to account tax that is due on the depreciation recapture of an investment sold.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you muffin.

Customer: replied 8 years ago.
The amount in question is in the range of 15000.00 and is the difference between the value of stocks sold and their cost basis in an ETF account. There is no depreciation in volved as I understand that term. That same fund generated 1866.00 in qualified dividends which the schedule do worksheet instructs me to tax at 15% (line 23).
Hello again muffin,

Do you have any entries on line 18 of Schedule D?

Customer: replied 8 years ago.
Only the amount transferred from the 28% rate gain worksheet for line 18. That is the same 15000.00 mentioned on line 32.
Hello again muffin,

That is where your problem is. If all you had was stock sales and qualified dividends, then you should not have completed the 28% rate gain worksheet.

That worksheet is strictly to report collectibles that you sold. It has nothing to do with stock sales. Collectibles are another item which do not qualify for the 15% rate.

You should have no entry at all on line 18 of Schedule D, and then this 28% tax rate will not apply to you.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you muffin.

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