Question

Mr. Smith, a single taxpayer, died in Year 4. His Year 4 taxable income of $40,000 included the following stock transactions: Adjusted Selling Stock Purchased Sold Basis Price Charlie 03/18/Yr 4 5/20/Yr 4 $3,000 $4,500 Edward 10/10/Yr 1 7/11/Yr 4 5,500 1,100 Diane 04/23/Yr 4 7/29/Yr 4 1,700 1,600 Meg 02/05/Yr 2 9/16/Yr 4 8,000 6,000 What is the amount of the capital loss deduction for Year 4 and the amount of the capital loss carryover to the decedent’s estate?

Answer 1

$3000 (capital loss deduction) , $2000 (Carryover)

Explanation:

The computation of the amount of the capital loss deduction for Year 4 and the amount of the capital loss carryover to the decedent’s estate is shown below:-

Short term capital gain = $1,400

Long Term capital loss = $6,400

Net Long term loss = $6400 - $1400 = $5,000

For the computation of short term capital gain and long term capital loss please look into the spreadsheet which has been attached.

As Mr. Smith is a single tax payer so it would claimed a deduction for long term capital loss till $3,000 in oppose to ordinary income. If any loss above $3,000 so it would be carried for indefinite period. This excess amount would be utilized by the beneficiary