During 2016, your clients, Mr. and Mrs. Howell, owned the following investment assets:

Because of the downturn in the stock market, Mr. and Mrs. Howell decided to sell most of their stocks and mutual fund in 2016and to reinvest in municipal bonds. The following investment assets were sold in 2016:

The Howells’ broker issued them a Form 1099 showing the sales proceeds net of the commissions paid. For example, the IBM sales proceeds were reported as $13,600 on the Form 1099 they received.

In addition to the sales reflected in the table above, the Howell’s provided you with the following additional information concerning 2016:

• The Howells received a Form 1099 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 6/30/16.

• In 2011, Mrs. Howell loaned $6,000 to a friend who was starting a new multilevel marketing company called LD3. The friend declared bankruptcy in 2016, and Mrs. Howell has been notified that 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. Go to the IRS web site (www.IRS.gov) and download the most current version of Form 8949 and Schedule D. Use Form 8949 and page 1 of Schedule D to compute net long-term and short-term capital gains. Then, 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 $25,000. Assume that asset bases are reported to the IRS.

b. Are there any tax planning recommendations related to the stock sales that you should have shared with the Howells before their decision to sell?

c. Assume the Howells’ short-term capital loss carryover from prior years is $82,300 rather than $2,300 as indicated above. If this is the case, how much short-term and long-term capital loss carryover remains to be carried beyond 2016to future tax years?

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Investment Assets Date Purchase Broker's Commission Paid at Time of Purchase Acquired Price $100 300 shares of IBM common 11/22/13 200 shares of IBM common 3,000 shares of Apple preferred 2,100 shares of Cisco $10,350 4314S43.250 S300 12/12/14$147,000 $1,300 8/14/15 S $52,500 $550 common 420 Shares of Vanguard mutual fund 3/2/16 S14,700 No load fund* Investment Asset Date Sold Sale Broker's PriceCommission Paid at Time of Sale@ 300 shares of IBM commn5/6/16 S13,700 3,000 shares of Apple preferred 2,100 shares of Cisco S100 10/5/16$221,400 $2,000 8/15/16S63,250 $650 common 451 Shares of Vanguard mutual fund 12/21/16S15,700 No load fund