Question

What would be the capital gain or loss amount reported on a return if each year builds off of the each other?

                   Year 1 – Capital Gains $25,000; Capital Losses 38,000

Year 2 – Capital Gains $15,000; Capital Losses 12,000

Year 3 – Capital Gains $80,000; Capital Losses $40,000

Year 4 – Capital Gains $30,000; Capital Losses 2,000

Year 5 – Capital Gains $20,000; Capital Losses $25,000

Answer 1

Capital gain or loss to be reported each year :

Year 1 - Net Capital Loss = $25,000 - $38,000 = $13,000 (to be carried forward)

Year 2 - Net Capital Gain = $15,000 - $12,000 = $3,000

Out of this gain, brought forward loss of year 1 will be set-off.

Net Capital Loss in Year 2 = $3,000 - $13,000 = $10,000

Year 3 - Net Capital Gain = $80,000 - $40,000 = $40,000

Out of this gain, balance of brought forward loss of year 1 will be set-off.

Net Capital Gain = $40,000 - $10,000 = $30,000

Year 4 - Net Capital Gain = $30,000 - $2,000 = $28,000

Year 5 - Net Capital Loss = $20,000 - $25,000 = $5,000.