Question

Patrick, a 43-year-old taxpayer who will use the single filing status, bought 100 shares of HIJ stock for $10,000 in 2015. There were no subsequent adjustments to his basis, but the stock underperformed, and he sold his shares for $4,250 in 2019. Patrick had no other capital gains or losses during the year, and his only other income consisted of $80,000 in wages. If Patrick deducts the maximum capital loss on his 2019 return, what is his long-term capital loss carryover for 2020? $0

Answer 1

Patrick, a 43-year-old taxpayer

Patrick's long-term capital loss carryover for 2020 is:

$2,750.

Step-by-step explanation:

a) Data and Calculations:

Investment in HIJ stock = $10,000 in 2015

Sale of investment in 2019 = $4,250

Capital loss = $5,750 ($10,000 - $4,250)

Maximum allowed capital loss in 2019 = $3,000

Carryover capital loss for 2020 = $2,750 ($5,750 - $3,000)

b) Patrick is allowed to offset his capital losses against his capital gains. However, he can use a capital loss as an offset to ordinary income, up to $3,000 per year. Since he has more than $3,000, the difference of $2,750 will be carried forward to future tax years.