Andy has the following capital gains and losses during the current year:
Andy's capital gains and losses will
$$\begin{array} { l c }
\text { Short-term capital gain } & \$ 4,000 \
\text { Short-term capital loss } & ( 9,000 ) \
\text { Collectibles loss } & ( 2,000 ) \
\text { Long-term capital gain } & 1,000
\end{array}$$
A)Increase taxable income by $2,000.
B)Decrease taxable income by $6,000.
C)Decrease taxable income by $3,000.
D)Decrease taxable income by $4,000.

Question

Andy has the following capital gains and losses during the current year:
Andy's capital gains and losses will
$$\begin{array} { l c } 
\text { Short-term capital gain } & \$ 4,000 \
\text { Short-term capital loss } & ( 9,000 ) \
\text { Collectibles loss } & ( 2,000 ) \
\text { Long-term capital gain } & 1,000
\end{array}$$
A)Increase taxable income by $2,000.
B)Decrease taxable income by $6,000.
C)Decrease taxable income by $3,000.
D)Decrease taxable income by $4,000.

Quizplus · Accepted Answer

Capital losses can be used to offset capital gains, reducing the taxable income. In this case, Andy has $8,000 in capital gains and $5,000 in capital losses, so the net capital gains are $3,000 ($8,000 - $5,000). This means that Andy can use $3,000 of the losses to offset the gains, reducing the taxable income by $3,000.

Andy Has the Following Capital Gains and Losses During the Current