4. Cecelia is an avid art collector who owns many original works of art. Recently, she decided to sell an oil painting by Norman Rockwell. The buyer paid $500,000 for the painting. Since Cecelia had paid just $350,000 for the painting, she made a profit, or capital gain, on the sale. Determine Cecelia’s capital gain by subtracting $350,000 from $500,000. If the capital gain tax is 15 percent, you would calculate the tax bill by multiplying her capital gain by 0.15. How much tax did Cecelia owe?
To determine Cecelia's capital gain, we need to subtract the original purchase price from the selling price. In this case, the original purchase price is $350,000 and the selling price is $500,000.
Capital gain = Selling price - Purchase price
Capital gain = $500,000 - $350,000
Capital gain = $150,000
So Cecelia's capital gain is $150,000.
To calculate the tax bill, we need to multiply the capital gain by the tax rate, which is 15%.
Tax bill = Capital gain * Tax rate
Tax bill = $150,000 * 0.15
Tax bill = $22,500
Therefore, Cecelia owes $22,500 in taxes.