Question

Capital Gains and Losses (LO. 5) Jawan has the following capital gains and losses in the...

Capital Gains and Losses (LO. 5)

Jawan has the following capital gains and losses in the current year:

Short-term capital loss $1,300
Long-term capital gain 8,600
Long-term capital loss 4,100
Long-term capital loss carryforward 3,500

What is the effect of the capital gains and losses on Jawan's taxable income?

The capital gain and loss netting results in a short-term capital loss of $_________.

Homework Answers

Answer #1

1. First Netting:-

Short term gain and loss netting:-

Short term capital gain:- Nil

Short term capital loss :- $(1300)

Net short term capital loss = $(1300)

Long term gain and loss netting:-

Long term capital gain:- $8600

Long term capital loss :- $(4100)

Long term capital loss carry forward $(3500)

Net long term capital gain :- $1000

Since the first netting results in both gain and a loss , therefore a second netting is required to reduce the capital gains and loss to either a net gain or loss for the year.

Second Netting:-

Net short term capital loss $(1300)

Net long term capital gain $1000

Net Short term capital loss $300

Jawan can deduct the $300 net short - term capital loss.

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