Question

For the current year, Diana Clark had salary income of $38,000. In addition, she had the following capital transactions during the year: Long-term capital gain $14,000 Short-term capital gain 6,000 Long-term capital loss (4,000) Short-term capital loss (8,000) There were no other items includible in her gross income. What is her adjusted gross income for the year

Answer 1

Answer: Her adjusted gross income for the year is $46,000

Explanation: To calculate her adjusted gross income, we determine the net value of her long-term capital gain and loss, and also the net value of her short-term capital gain and loss.

The Net of her short-term capital will be (short-term capital gain ($6,000) - short-term capital loss($8,000) = $2,000

The net of her long-term capital will be (long-term capital gain ($14,000) - long-term capital loss ($4,000) = $10,000

The net capital gain will now be net long-term capital $10,000 - net short-term capital $2,000 = $ 8,000

The adjusted gross wages will be Wages $38,000 + net capital gain$8,000 = $46,000