Rosalee has the following capital gains and losses during the current year:
$\begin{array}{c}
\text { Short-term capital loss } &\$(4,000) \
\text {Long-term capital gain } &3,000 \
\text { Unrecaptured Section 1250 gain } &6,000
\end{array}$
If Rosalee is in the 33% marginal tax rate bracket before considering her capital gains and losses,how much tax does she pay on her capital gains?

Question

Rosalee has the following capital gains and losses during the current year:
$\begin{array}{c}
 \text { Short-term capital loss } &\$(4,000) \
 \text {Long-term capital gain  } &3,000 \
 \text { Unrecaptured Section 1250 gain } &6,000
\end{array}$
If Rosalee is in the 33% marginal tax rate bracket before considering her capital gains and losses,how much tax does she pay on her capital gains?

Quizplus · Accepted Answer

Rosalee's net capital gain is $5,000 ($3,000 long-term gain + $6,000 unrecaptured Section 1250 gain - $4,000 short-term loss). The unrecaptured Section 1250 gain is taxed at a maximum rate of 25%. Therefore, $5,000 is taxed at 25%, resulting in $1,250. However, the short-term loss offsets part of the long-term gain, reducing the taxable amount to $2,000 at 25%, which is $500, and the remaining $3,000 is taxed at 15%, which is $450. Total tax is $950.

Rosalee Has the Following Capital Gains and Losses During the Current