K sold the following investments during the current year: How much are K's net long-term capital gain or loss and net short-term capital gain or loss, respectively, if any?

Question

K sold the following investments during the current year:  How much are K's net long-term capital gain or loss and net short-term capital gain or loss, respectively, if any?

Quizplus · Accepted Answer

To calculate K's net long-term capital gain or loss, we need to add up the long-term capital gains and losses separately. K has only one long-term capital gain, which is the sale of investment A for $10,000, resulting in a long-term capital gain of $3,000 ($10,000 - $7,000). K has no long-term capital losses.

To calculate K's net short-term capital gain or loss, we need to add up the short-term capital gains and losses separately. K has two short-term capital gains: the sale of investment B for $5,500, resulting in a short-term capital gain of $1,500 ($5,500 - $4,000), and the sale of investment C for $2,800, resulting in a short-term capital gain of $400 ($2,800 - $2,400). K also has one short-term capital loss: the sale of investment D for $3,600, resulting in a short-term capital loss of $300 ($3,600 - $3,900).

So, K's net short-term capital gain is $1,600 ($1,500 + $400 - $300), and K's net long-term capital gain is $3,000. Therefore, K's total capital gain is $4,600 ($3,000 + $1,600). However, the question only asks for the net long-term and net short-term capital gains or losses, so the answer is (C) $1,900 and $600.

K Sold the Following Investments During the Current Year