Question

2. During 2017, Tom sold Sears stock for $10,000. The stock was purchased 4 years ago for $13,000. Tom also sold Ford Motor Company bonds for $35,000. The bonds were purchased 2 months ago for $30,000. Home Depot stock, purchased 2 years ago for $1,000, was sold by Tom for $2,500. Calculate Tom’s net gain or loss, and indicate the nature of the gain or loss. $__________

Answer 1

Long term capital Gain/Loss:

Gain or loss arising from sale of asset which is held for a period more than 1year to sale is called Long term Capital Gain or Long term capital loss

Short term capital Gain/Loss:

Gain or Loss arising from sale of asset which is held for a period of 1year or lesser period is called Short term capital gain or short term capital loss..

Answer:

Particulars	Calculation	Amount	Nature of Gain/Loss
Sears stock	$10000-$13000	$3000	Long term capital loss
Home Depot stock	$2500-$1000	$1500	Long term capital gain
A. Net Long term Capital Loss	$3000-$1500	$1500
Ford Motor Company Bonds	$35000-$30000	$5000	Short term capital gain
B. Short term capital Gain		$5000

Net Short tem capital Gain = B - A

= $5000 -$1500

= $3500

The Net Long term capital loss of $1500 is offset by net short term capital gain of $5000 resulting into Net short term capital gain of $3500.