Question

For the current tax year, Morgan had $25,000 of ordinary income. In addition, he had an $1,900 long-term capital loss and a $1,600 short-term capital loss. What will be the amount of Morgan's capital loss carryforward to the next year?

a) $1,900
b) $1,600
c) $3,500
d) $0

Answer 1

To calculate Morgan's capital loss carryforward to the next year, we add the long-term and short-term capital losses together, resulting in $3,500.

Step-by-step explanation:

To determine Morgan's capital loss carryforward to the next year, we need to consider the tax rules regarding capital losses. In this case, Morgan had a long-term capital loss of $1,900 and a short-term capital loss of $1,600. According to the rules, Morgan can use these capital losses to offset any capital gains he may have in the future. If there are any remaining losses after offsetting the capital gains, Morgan can carry them forward to future years to offset future capital gains.

Since there are no capital gains mentioned in the question, Morgan's capital loss carryforward to the next year would be the sum of the long-term and short-term capital losses, which is $1,900 + $1,600 = $3,500.