A taxpayer has a $3,000 short-term capital loss carryover from the prior year. In the current year, the taxpayer has a $12,000 long-term capital gain and a $15,000 short-term capital loss. What is the taxpayer's deductible capital loss for the current year?

Answer options:

$3,000

$6,000

$15,000

How to approach this question

Net everything. If net loss, deduct up to $3,000 against ordinary income.

Full Answer

A.$3,000✓ Correct

Total STCL = $15,000 + $3,000 = $18,000. Net against LTCG of $12,000 = Net Capital Loss of $6,000. Individuals can deduct up to $3,000 of net capital loss against ordinary income per year.

Common mistakes

Forgetting the $3,000 annual limitation.

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