Question

) Thoren has the following items for the year: $4,000 of short-term capital gain, $5,000 of 0%/15%/20% long-term capital gain, and $1,500 of 28% capital loss. Which of the following is correct?

a. The $1,500 loss will first be offset by the $4,000 short-term gain.

b. The $1,500 loss will first be offset by the $5,000 long-term gain.

c. The $4,000 short-term gain will first be offset by the $5,000 long-term gain.

d. The taxpayer will have a net short-term capital loss.

Answer 1

Thoren has the following items for the year: $4,000 of short-term capital gain, $5,000 of 0%/15%/20% long-term capital gain, and $1,500 of 28% capital loss.

The $4,000 short-term gain will first be offset by the $5,000 long-term gain. We must first offset the short term capital gain against the long term gain to calculate the net capital gain loss / income . If there there is any gain remaining , then the capital loss can be offset against the gain , if not the capital loss can be offset to odinary income up to $3000 per year.