Question #28: Determing Net Capital Gain or Loss During the year, Tamara had capital transactions resulting...

Question #28: Determing Net Capital Gain or Loss

During the year, Tamara had capital transactions resulting in gains (losses) as follows:
Sold stock in ABC Company (acquired two years ago)	-$1,500
Sold collectible coins (held for more than one year)	$2,000
Sold stock in XYZ Company (acquired six months ago)	-$4,100
Sold stock in LMN Company (acquired three years ago)	$500
Determine Tamara's net capital gain or loss as a result of these transactions.

Step #1 - Determine Long-Term Capital Gain
Input Short-Term amounts from above to determine long-term gain/(loss)
Sold stock in ABC Company (acquired two years ago)
Sold collectible coins (held for more than one year)
Sold stock in XYZ Company (acquired six months ago)
Sold stock in LMN Company (acquired three years ago)
Total Gain / (Loss)

Step #2 - Determine Short-Term Capital Gain
Input Short-Term amounts from above to determine long-term gain/(loss)
Sold stock in ABC Company (acquired two years ago)
Sold collectible coins (held for more than one year)
Sold stock in XYZ Company (acquired six months ago)
Sold stock in LMN Company (acquired three years ago)
Total Gain / (Loss)


Step #3 - Compute Long-Term and Short-Term Gain / (Loss)
Net Capital Gain / (Loss)		Compute the Gain / (Loss)
Explain Tamara's Gain or Loss position at the end of the year, including any deductions and carryover amounts.

Expert Solution

Step #1 - Determine Long-Term Capital Gain	Amount($)
Input Short-Term amounts from above to determine long-term gain/(loss)
Sold stock in ABC Company (acquired two years ago)	-1500
Sold collectible coins (held for more than one year)	2000
Sold stock in XYZ Company (acquired six months ago)	0
Sold stock in LMN Company (acquired three years ago)	500
Total Gain / (Loss)	1000

Step #2 - Determine Short-Term Capital Gain	Amount($)
Input Short-Term amounts from above to determine long-term gain/(loss)
Sold stock in ABC Company (acquired two years ago)	0
Sold collectible coins (held for more than one year)	0
Sold stock in XYZ Company (acquired six months ago)	-4100
Sold stock in LMN Company (acquired three years ago)	0
Total Gain / (Loss)	-4100

Step #3 - Compute Long-Term and Short-Term Gain / (Loss)	Amount($)
Net Capital Gain / (Loss)	-3100

Any capital gain/loss on asset held for less than a year is treated as short term and for a year or more is treated as long term. Tamara has an overall net loss of $3,100. This loss can be used to offset Tamara's income from other sources to a maximum of $3,000 in a given year. And the remaining will be carried forward to the future years infinitely. If there is no other income, then full amount can be carried forward. But the cap of $3,000 annually will apply in future years as well for offsetting.

ekkarill92 answered 2 years ago

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