Question

For the current year, Harry reported salary and taxable interest income of $50,000. His capital asset transactions during the year were as follows: Long-term capital loss ($5,000) Long-term capital gain $1,000 For the current year, what amount should Harry report as adjusted gross income

Answer 1

adjusted gross income = $47,000

Step-by-step explanation:

ordinary income = $50,000

capital losses = $1,000 - $5,000 = -$4,000

but the IRS limits the amount of capital losses than can offset ordinary income to $3,000 per year. The remaining $1,000 will be carried forward.

AGI = $50,000 - $3,000 = $47,000