In 2019, Mark has $18,000 short-term capital loss, $7,000 28% gain, and $6,000 0%/15%/20% gain.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

First, Mark can use the short-term capital loss to offset any short-term capital gains. In this case, he has $7,000 in short-term capital gains, so he can use $7,000 of his $18,000 short-term capital loss to offset these gains, leaving him with a remaining short-term capital loss of $11,000.

Next, Mark can use the remaining short-term capital loss to offset any long-term capital gains. In this case, he has no long-term capital gains, so he cannot use any more of his short-term capital loss.

Mark can then use up to $3,000 of his remaining short-term capital loss to offset ordinary income. This leaves him with a total capital loss deduction of $11,000 + $3,000 = $14,000.

Finally, Mark has $6,000 in long-term capital gains. These are taxed at a lower rate than his ordinary income. The $7,000 28% gain is irrelevant since it is not classified as a capital gain. Mark's net capital gain is $6,000 - $14,000 = -$8,000.

Since Mark has a net capital loss, he cannot have a net capital gain. Therefore, the only possible answer is B) Mark has a $3,000 capital loss deduction.

In 2019, Mark Has $18,000 Short-Term Capital Loss, $7,000 28