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Capital assets and taxes

Joel has four transactions involving the sale of capital assets during the year resulting in a STCG of $5,000, a STCL of $12,000, a LTCG of $1,800 and a LTCL of $1,000. As a result of these transactions, Joel will:

A. deduct net losses of $6,200 against ordinary income.
B. deduct losses of $3,000 against ordinary income and carry $3,200 of STCL forward.
C. deduct losses of $3,000 against ordinary income and carry $3.200 of LTCL forward.
D. deduct losses of $3,000 against ordinary income and carry $3,200 of losses back two years.

Short Term Capital Loss = -7000
Long Term Capital Gain = 800

B - If total STCL exceed total STCG for the tax year, the excess is defined as a net short-term capital loss. If NSTCL exceeds NLTCG, the capital loss may be offset, on a dollar-for-dollar basis, against a non-corp taxpayer's ordinary income for amounts up to 3000 in any 1 year.

Solution Preview

Here is the process:

Step one: net the short term gains and losses
Step two: net the long term gains and losses

Net short term: Gain of ...

Solution Summary

The process and reasons are given to approach this type of problem. Computations are reviewed.

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