Mercedes has a net long-term capital gain of $3,000 and a net short-term capital loss of $10,000. She can deduct $3,000 of the $7,000 net loss as a deduction for adjusted gross income in the current year. She must defer realizing any tax benefit from the remaining $4,000 loss until the next year.

Question

Quizplus · Accepted Answer

This is correct according to the IRS rules for deducting capital losses. Net capital losses can be used to reduce taxable income up to a maximum of $3,000 per year, with any remaining losses carried forward to future years. In this case, Mercedes has a $7,000 net loss, but can only deduct $3,000 in the current year, with the remaining $4,000 loss carried forward to the next year.

Mercedes Has a Net Long-Term Capital Gain of $3,000 and a Net