Question

Sarah sold the below property during 2019. None of the property was sold to a related party or in a wash sale. Apart from any capital gains or losses, Sarah's only other taxable income in 2019 is $10,000, all of which is from wages (ordinary income).

Property	Adjusted Basis	Amount Realized
Sale of personal-use car held 2 years	$18,000	$12,000
Stock F held for 6 months	$5,000	$3,000
Stock G held for 3 months	$6,000	$3,000
Stock H held for 5 years	$7,000	$13,000
Stock I held for 3 months	$5,000	$8,000

After the netting process, what is the amount of Sarah’s net capital gain/loss?

Which of the following is most accurate?

A. Sarah has a net short-term capital loss which is taxed at her ordinary income tax rates

B. Sarah has a net capital gain which is taxed at 0% and net short-term capital gain which is taxed at the same rate as her ordinary income

C. Sarah has a net capital loss, but she can only deduct $3,000 of her net capital loss in 2019

D. Sarah has a net capital gain, all of which is taxed at 0%

E. Sarah has a net capital loss, all of which is deductible in 2019

Assume for this question only that, in addition to the sale of her personal-use car and Stocks F through I, Sarah also sold Stock J for a $5,000 short-term capital gain. After the netting process, Sarah would have ______ net capital gain and ______ net short-term capital gain.

Answer 1

Sarahs sale of personal car and its loss will be treated as her personal expense and wont be treated as a long term capital loss.

So, for stock f(6Months)- Short term capital loss-2000

stock G(3Months)-Short term capital loss-3000

Stock H(5YEArs)-LOng term capital gain-6000

Stock i(3MOnths)- short term capital gain-3000

First short term loss is set off with short term gain,and then short term losses can be set off against long term gain

So after netting process, Sarah has a net long term capital gain of 4000

So, the most accurate is

D.Sarah has a net capital gain which is taxed at 0%

If sarah also had a stock J for which she has a short term capital gain of 5000, then total short term loss of stock F and stock G Ii.e 3000+2000= 5000will be set off with short term capital gain of stock J of 5000

so Sarah would have 6000 long term capital gain and 3000 short term capital gain.