ExpertMedium1 markMultiple Choice
CPA · Question 20 · Area IV: Property Transactions
A taxpayer has the following capital gains and losses in Year 1:<br/>- Short-term capital gain: $5,000<br/>- Short-term capital loss: ($12,000)<br/>- Long-term capital gain (15% rate): $10,000<br/>- Long-term capital loss (28% rate group): ($2,000)<br/>What is the net capital gain/loss position?
A taxpayer has the following capital gains and losses in Year 1:<br/>- Short-term capital gain: $5,000<br/>- Short-term capital loss: ($12,000)<br/>- Long-term capital gain (15% rate): $10,000<br/>- Long-term capital loss (28% rate group): ($2,000)<br/>What is the net capital gain/loss position?
Answer options:
A.
$1,000 Long-term capital gain
B.
$1,000 Short-term capital gain
C.
$3,000 Net capital loss
D.
$8,000 Long-term gain and ($7,000) Short-term loss
How to approach this question
1. Net ST items: $5k - $12k = ($7k) STCL. 2. Net LT items: $10k - $2k = $8k LTCG. 3. Net ST against LT: ($7k) + $8k = $1k Net LTCG.
Full Answer
A.$1,000 Long-term capital gain✓ Correct
A
IRC §1222. Net Short-Term Capital Loss = ($7,000). Net Long-Term Capital Gain = $8,000. Since signs are opposite, net them: $8,000 - $7,000 = $1,000. The character is Long-Term because the absolute value of the LT gain was greater.
Common mistakes
Stopping before netting the ST and LT totals.
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