Question

Shannon, a single taxpayer, has a long-term capital loss of $7,000 on the sale of bonds in 2019 and no other capital gains or losses. Her taxable income without this transaction is $47,000. What is her taxable income considering this capital loss?

Answer 1

Shannon's taxable income after considering capital loss=$44,000

Step-by-step explanation:

Taxable income is the total amount of income that a taxpayer is liable to. Different individuals are liable to different levels of tax. There are various factor that have to be considered to calculate the amount of taxes one needs to pay. For ease in computation, these factors are used to categorize individuals into different groups depending on;

1. Age

2. Marital status: whether single or married

3. Whether one has a child or not

4. Employment status

In the case of Shannon, who has a long-term capital loss of $7,000. The tax laws stipulates that she can deduct up to a maximum of $3,000 in long-term or short-term capital loss each year. With this inform, we can now calculate the taxable income as shown;

Taxable income=Taxable income-capital loss deduction

where;

Taxable income=$47,000

capital loss deduction=$3,000

replacing;

Taxable income=47,000-3,000=$44,000

Shannon's taxable income after considering capital loss=$44,000