Question

In the current year, Taxpayer, who is an unmarried individual, realized $54,000 of ordinary income, a net short-term capital loss of $9,600, and a net long-term capital gain of $3,200. Select the answer that best describes the impact of the gains and losses. The taxpayer reports an offset against ordinary income of $3,000 and a net short-term capital loss carryforward of $6,600 Taxpayer reports an offset against ordinary income of $3,200 and a net short-term capital loss carryforward of $6,400 Taxpayer reports an offset against ordinary income of $3,000 and a net short-term capital loss carryforward of $3,400 Taxpayer reports an offset against ordinary income of $3,000 and a net short-term capital loss carryforward of $6,400 Taxpayer reports an offset against ordinary income of $9,600

Answer 1

Net long term capital gain or loss is netted of with net short term capital gain or loss.

Final net gain/ loss = $6,400 short-term loss ($3,200 LT gain - $9,600 ST loss)

Taxpayer can only deduct $3,000 of the final net short- or long-term losses against ordinary income for that year and must carry forward any remaining balance.

Short term capital loss carry forward = $6,400 - $3,000 = $3,400.

Answer is C. Taxpayer reports an offset against ordinary income of $3,000 and a net short-term capital loss carry forward of $3,400.

Please up vote. Thanks!