Question

58. LO.5 Elaine Case (single with no dependents) has the following transactions in 2019: AGI (exclusive of capital gains and losses) $240,000 Long-term capital gain 22,000 Long-term capital loss (8,000) Short-term capital gain 19,000 Short-term capital loss (23,000) What is Elaine's net capital gain or loss? Draft a letter to Elaine describing how the net capital gain or loss will be treated on her tax return. Assume that Elaine's income from other sources puts her in the 37% bracket. Elaine's address is 300 Ireland Avenue, Shepherdstown, WV 25443.

Answer 1

Elaine – income from other sources puts her in the 37% bracket

As per Income details as per AGI , We identified that Elaine made NET Long term, capital Gain amount to $ 22000-$8000 = $ 14000 .Long term capital gain - $ 22000, Long term capital Loss -$8000 . In other side Short term capital Loss-$4000 ( Short term Capital gain $ 19000 and short term Capital Loss -$23000) . So Overall position , Elaine made Long term capital Gain $14000-$4000 =$10000 ( after absorb Short term capital Loss) .

Above stock transactions will be reported on the Schedule D attached to FORM 1040 .The $ 10000 net capital gain Qualifies for the alternative tax on capital Gain and will be taxed at a 20% rate rather than at margin tax rate of 37%