Question

In 2018, Mark has $18,000 short-term capital loss, $7,000 28% gain, and $6,000 0%/15%/20% gain. Which of the statements below is correct?

(A) Mark has a $5,000 capital loss deduction.
(B) Mark has a $3,000 capital loss deduction.
(C) Mark has a $13,000 net capital gain.
(D) Mark has a $5,000 net capital gain.
(E) Mark has a $18,000 net capital loss.

Answer 1

(B) Mark has a $3,000 capital loss deduction.

Step-by-step explanation:

Based on the tax bracket proposed, we deteminate the 7,000 is a short-term gain

and the second a long term gain.

First we must offset short capital losses against short capital gains:

7,000 - 18,000 = 11,000 short-term loss

now we offset against long term, if it is gain it will be long term gain if loss short term loss:

6,000 - 11,000 = 5,000 short-term loss

Okay we end up with a total loss of 5,000 but; we have a cap at 3,000 . So that is all Mark can claim as a deduction in other categories against wages and salaries or to carry foward over next period