Question

Bob sold securities in Year 1. The sales resulted in a capital loss of $7,000. He had no other capital transactions. He and his wife Gloria decide to file separate returns for Year 1. His taxable income was $26,000.

What amount of capital loss can he deduct on his Year 1 return and what amount can he carry over to Year 2?

A. $7,000 in Year 1 and $0 carry over to Year 2.
B. $3,000 in Year 1 and $4,000 carry over to Year 2.
C. $4,000 in Year 1 and $3,000 carry over to Year 2.
D. $1,500 in Year 1 and $5,500 carry over to Year 2

Answer 1

D. $1,500 in Year 1 and $5,500 carry over to Year 2

Step-by-step explanation:

Base on the scenario been described in the question, Bob and his wife after selling securities in 1 year loss $7,000, but we saw that he was not having another capital, the return him and his wife will fill for one year and carrying over to the next with a $26,000 taxable income is $1,500 in a year and and the remaining $5,500 will be carried to the next two years .