Question

16-29 Capital Gains and Losses. L, a single individual, earned salaries and wages of $64,000 and interest of $3,000 and dividends of $3,700 for the current year. In addition, L sold the following capital assets: 10 shares LMN common stock, held ten months..... $1,400 gain 1990 Dodge sedan, used four years for personal purposes... 2,600 loss 10 acres of land, held six years for investment.......... 9,200 loss a. Compute L's overall capital gain or loss. b. Compute L's adjusted gross income.

Answer 1

(Name: Income: Salaries and Wages Interest Dividends Income excluding Capital Gains/Losses Status: Single Individual Amount $ 64,000 $ 3,000 $ 3,700 Capital losses/Gains 10 shares LMN Common Stock 10 acres of land Total $ 70,700 Short-term Long-term $ 1,400 $ $ -9,200.00 $ 1,400 $ -9,200.00 $ -7,800.00 => Sum of the totals above Net Capital Loss Overall Capital Gain/Loss $ -7,800.00 b. $ 70,700 L's Adjusted Gross Income Total Income excluding Capital Gains/Losses Less: Capital Losses deductible per Note (iii) below Adjusted Gross Income $ $ 3,000 67,700

Notes: Since Interest received by a Non-resident on a US bank deposit is exempt from tax, Lis assumed to be a resident individual. Hence i. the interest is added to Gross income excluding Cccapital Gains ii. Losses on sale of Capital assets used for personal purposes, in this case 1990 Dodge Sedan, are not deductible. Capital Losses are only deductible against Capital Gains. However for resident single individuals, Capital losses can be deducted iii. against other income to the extent of $3000.