This is a question about the United States tax code, and in particular about the demarcation between brackets for long term capital gains. I recognize that the specific cutoffs and tax rates are subject to change.
I think my question will be clearer if I construct an example. So:
Let's take it as given that for a single taxpayer, the highest capital gains rate is 20% , and this kicks in at $441,450. Let's suppose that I am that single taxpayer, that I have ordinary income of $100,000, and that I have a long term capital gain of $600,000.
Which of the following scenarios is correct (ignoring all sorts of minutiae like adjusting for qualified dividends, etc.)?
a) Of that $600,000, $158,550 (the excess of my capital gain over $441,450) is taxed at 20%.
b) Of that $600,000, $258,550 (the excess of my capital-gain-plus-income over $441,450) is taxed at 20%.
c) None of the above.