Melinda and Riley are married taxpayers. During the year, they completed a single capital asset sale in which a loss of $120,000 is realized on the sale ($15,000 amount realized, less $135,000 adjusted basis) of qualified small business stock. How much of the loss can the taxpayers deduct?

Question

Quizplus · Accepted Answer

As married taxpayers filing jointly, Melinda and Riley can deduct up to $100,000 of net capital losses in a tax year. Since the loss realized on the sale of qualified small business stock is a capital loss, they can deduct up to $100,000 of the $120,000 loss in the current year. The remaining $20,000 can be carried forward to future tax years. Therefore, the taxpayers can deduct $103,000 ($100,000 + $3,000) of the loss now and carry forward $17,000 ($20,000 - $3,000) to future tax years. Option D is the correct answer.

Melinda and Riley Are Married Taxpayers