Ark. Code R. 26-51-815 - 1(b) (1997) - 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:
- 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
- A tax of six percent (6%) on the amount of taxable income in excess of the amount determined under subdivision (1) above.
IRC Section1222 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:
Click here to view image.
Mr. Jones' Tax Liability is calculated as follows:
Click here to view image.
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:
Click here to view image.
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:
Click here to view image.