Question

Angie incurred capital gains and losses during the current year. She has a $12,000 net short-term capital loss; a $5,000 long-term capital gain in the 15% category; and a $15,000 long-term capital gain in the 28% category. How will these transactions be taxed after the gains and losses are combined?
A. $5,000 will be taxed at 15% and $12,000 will be taxed at 28%.
B. $2,000 will be taxed at 15% and $15,000 will be taxed at 28%.
C. $3,000 will be taxed at 28% and $5,000 will be taxed at 15%.
D. $8,000 will be taxed at 28%.

Answer 1

Answer:

C) $3,000 will be taxed at 28% and $5,000 will be taxed at 15%.

Explanation:

Since Angie's capital total capital losses are less than her total capital gains, she can deduct them fully from her current taxes. Capital losses can deduct taxable income or any type of capital gain.

In this case, Angie can benefit by deducting capital losses from the capital gains that fall into the highest tax category = $15,000 - $12,000 = $3,000 capital gain in the 28% category.

The remaining capital gains aren't affected = $5,000 in the 15% category.