Question

In 2017, Richard had taxable income of $75,000. This amount included short-term capital losses of $3,000 and long-term capital losses of $7,000. He had no other capital transactions in prior years. What is Richard's capital loss carryover to 2018? $0 $1,000 $4,000 $7,000

Answer 1

Solution: $7,000

Explanation:

Richard had use $3,000 to reduce taxable income in 2017. So,he can carryover $7,000 to 2018. According IRS, If your investments end up losing money, rather than generating capital gains, you can use those losses to reduce your taxes. The IRS allows you to match up your gains and losses for any given year to determine your "net" capital gain or loss. If you end up with a net loss, you can use up to $3,000 per year to reduce your taxable income. Any additional losses can be carried-forward into future years, to offset either capital gains or another $3,000 in ordinary income.