Taxpayer has the following capital gains/losses: LTCG (15% rate) ,000; LTCL (28% rate collectibles) (,000); STCG ,000. What is the final tax treatment?

Answer options:

Net LTCG ,000 (taxed at 15%)

Net LTCG ,000 (taxed at 15%); Net STCG ,000 (taxed at ordinary rates)

Net Gain ,000 (taxed at ordinary rates)

Net LTCG ,000 (taxed at 28%)

How to approach this question

Netting: 1. ST vs ST. 2. LT vs LT (28% vs 25% vs 15%). 3. Net ST vs Net LT. If both are gains, keep separate. If mixed, offset.

Full Answer

B.Net LTCG ,000 (taxed at 15%); Net STCG ,000 (taxed at ordinary rates)✓ Correct

Long-term losses (even 28% ones) offset Long-term gains (15% ones). ,000 - ,000 = ,000 Net LTCG. Short-term gains are separate. Result: ,000 LTCG and ,000 STCG.

Common mistakes

Thinking 28% losses can only offset 28% gains.

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