Question

In 2020, Satesh has $5,000 short-term capital loss, $13,000 0%/15%/20% long-term capital gain, and $7,000 qualified dividend income. Satesh is single and has other taxable income of $15,000. Which of the following statements is correct?

a. Lana has $10 of long-term capital loss.
b. Lana has $190 of long-term capital gain.
c. Lana has no capital gain or loss.
d. Lana has $190 of long-term capital loss.

Answer 1

c. No more than $15,000 of Satesh's taxable income is taxed at 0%.

Step-by-step explanation:

Calculation to determine the statements that is correct

First step is to calculate the net long-term capital gain

Net long-term capital gain= ($13,000 0%/15%/20% Long-term capital gain - $5,000 Short-term capital loss)

Net long-term capital gain=$8,000

Now let add the amount of $7,000 which represent qualified dividend income to the 0%/15%/20% net long-term capital gain of the amount of $8,000 which will inturn will give us the amount of $15,000 which therefore means that the amount of $15,000 will be eligible for the 0%/15%/20% ALTERNATIVE TAX RATE.

Therefore the statements that is correct will be:

NO MORE THAN $15,000 of SATESH'S TAXABLE INCOME IS TAXED AT 0%.