1.26 Ark. Code R. 51-815(b)

Current through Register Vol. 49, No. 10, October, 2024

Rule 1.26-51-815(b) - Computation of Tax

If a taxpayer has a net capital gain for a given tax year, the tax on such capital gain shall not exceed the sum of:

1. A tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of :

A) Taxable income reduced by the amount of the net capital gain;

or

B) The amount of taxable income taxed at a rate below six percent (6%);

PLUS

2. A tax of six percent (6%) on the amount of taxable income in excess of the amount determined under subdivision (1) above.

IRC Section 1222 defines "net capital gain" as the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year.

CAPITAL GAINS

EXAMPLE 1: Mr. Jones, a single taxpayer with no dependents, reported a net taxable income of $40,000.00 after itemized deductions. The income and deductions were comprised of the following:

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Mr. Jones' Tax Liability is calculated as follows:

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REMINDER: Normal Arkansas Tax rates are graduated from 1% to 6% up to $ 25,000.00 and 7% for income $ 25,000.00 and above. The maximum tax rate for Net Capital Gains cannot exceed 6%.

CAPITAL GAINS

EXAMPLE 2: Same as Example 1 but the wages equal $ 15,000.00 and net taxable income equals $ 25,000.00.

Mr. Jones' Tax Liability is calculated as follows:

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CAPITAL GAINS

EXAMPLE 3: Same as Example 1 but wages equal $ 50,000.00 and net taxable income equal $ 60,000.00.

Mr. Jones' Tax Liability is calculated as follows:

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1.26 Ark. Code R. 51-815(b)