Accredited Wealth Management Advisor Practice Exam

To determine the amount of Medicare contribution tax applicable to a single taxpayer with an adjusted gross income (AGI) of $240,000 and a net long-term capital gain of $50,000, it's important to understand how the tax is calculated.

The Medicare contribution tax, also known as the Net Investment Income Tax (NIIT), applies to single taxpayers with AGI exceeding $200,000. The tax is assessed at a rate of 3.8% on the lesser of either the net investment income or the amount by which AGI exceeds the threshold.

In this scenario, the taxpayer's AGI of $240,000 exceeds the $200,000 threshold by $40,000. The net investment income, which includes long-term capital gains, is $50,000. Since the $40,000 excess AGI is less than the $50,000 in net investment income, the tax is based on the $40,000.

Calculating the Medicare contribution tax involves taking 3.8% of the $40,000:

3.8% of $40,000 = $1,520.

Therefore, the correct total Medicare contribution tax that the taxpayer must pay is $1,520. This reflects the calculation based