Question

5.   Christina had a $12,000 gain on the sale of stock purchased three years ago, a $4,000 loss on selling stock she had only owned for 3 months, a $5,000 loss on the sale of her personal use auto, and a $5,000 loss from the sale of land used in her business (owned for six years). Chris had no other property transactions this year. What will be the net effect of these transactions on Chris' tax return, in terms of gains and/or losses?

Answer 1

Here

Long term capital gain = 12000 (gain on the sale of stock purchased three years ago)

Long term capital loss = (5000) (loss on sale of land used in business)

Net long term capital gain = 7000

Short term capital loss = (4000) (loss on selling stock owned for 3 months)

Short term capital is offset from net long term capital gain

Net capital gain = 7000 +(4000) =3000

For tax purposes, capital losses are only reported on items that are intended to increase in value. They do not apply to items used for personal use such as automobiles (although the sale of a car at a profit is still considered taxable income). Therefore, loss on the sale of personal use auto will not be considered.