Wally (who is in the 24 percent tax bracket) has a $5,000 short-term capital loss on some bonds, a $6,000 long-term capital loss on collectibles, a $15,000 Section 1202 gain, and a net $4,000 long-term capital gain from an investment.What is amount and type of gain(s) and tax rate(s) applied?

Question

Quizplus · Accepted Answer

Wally's $5,000 short-term capital loss and $6,000 long-term capital loss can be combined for a total loss of $11,000. This total loss can offset the $15,000 Section 1202 gain (which is taxed at a 28% rate for collectibles) and the $4,000 long-term capital gain (which is taxed at a 15% rate for his tax bracket). After offsetting the gains with the losses, Wally is left with a $4,000 gain taxed at 28% (from the Section 1202 gain on collectibles) and a $4,000 long-term capital gain taxed at 15%.

Wally (Who Is in the 24 Percent Tax Bracket) Has