Rosalee has the following capital gains and losses during the current year:
?
$\begin{array}{lc}
\text { Short-term capital loss } & \$(4,000) \
\text { Long-term capital gain } & 3,000 \
\text { Unrecaptured Section } 1250 \text { gain } & 6,000
\end{array}$

If Rosalee is in the 32% 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:
?
$\begin{array}{lc}
\text { Short-term capital loss } & \$(4,000) \
\text { Long-term capital gain } & 3,000 \
\text { Unrecaptured Section } 1250 \text { gain } & 6,000
\end{array}$

If Rosalee is in the 32% marginal tax rate bracket before considering her capital gains and losses, how much tax does she pay on her capital gains?

Quizplus · Accepted Answer

The short-term capital loss of $4,000 can be used to offset the long-term capital gain of $3,000, leaving Rosalee with a net long-term capital gain of $0 and an unrecaptured Section 1250 gain of $6,000. Unrecaptured Section 1250 gains are taxed at a maximum rate of 25%. Therefore, the tax on the $6,000 unrecaptured Section 1250 gain is $6,000 * 25% = $1,500. However, since Rosalee's marginal tax rate is 32% and not the question's focus, the calculation solely relies on the specific tax treatment of the unrecaptured Section 1250 gain. The correct calculation for the tax on the capital gains, considering the specific rates applicable to the unrecaptured Section 1250 gain, leads to the correct answer of $1,500, which is not among the provided options, indicating a misunderstanding in the initial response. The correct approach involves understanding the tax treatment of different types of gains and losses, and applying the appropriate tax rates to each.

Rosalee Has the Following Capital Gains and Losses During the Current