Answer:
The correst option is b. $3,000 net long-term capital gain and $1,000 net short-term capital loss.
Explanation:
Note: This question is not comple and the data in it are merged together. The complete question withe sorted data are therefore provided before answering the question as follows:
Billy luker made several stock sales during 2018. determine the overall result of the following transactions:
Date Purchased Cost Date Sold Sales Price
1-1-20 $4,000 6-2-20 $6,000
7-6-19 10,000 7-7-20 14,000
7-6-19 20,000 7-6-20 17,000
4-3-19 5,000 6-2-20 4,000
a. $2,000 net short-term capital gain.
b. $3,000 net long-term capital gain and $1,000 net short-term capital loss. c. $2,000 net long-term capital gain.
d. $4,000 net long-term capital gain and $2,000 net short-term capital loss.
The explanation to answer is now given as follows:
Step 1: Calculation of net long-term capital gain/loss
Gains and losses that occurred from the sale or exchange of capital assets that are held for more than one year are referred to as long-term capital gains and losses.
From the question, the second and fourth stocks are held for more than one year and they are therefore long-term sales. Therefore, we have:
Long-term capital gain from the second stock sales = Sales Price – Cost = $14,000 - $10,000 = $4,000
Long-term capital loss from the fourth stock sales = Cost – Sales price = $5,000 - $4,000 = $1,000
Net long-term capital gain = Long-term capital gain from the second stock sales - Long-term capital loss from the fourth stock sales = $4,000 - $1,000 = $3,000
Step 2: Calculation of net short-term capital gain/loss
Gains and losses that occurred from the sale or exchange of capital assets that are held for one year or less are referred to as short-term capital gains and losses.
From the question, the first and third stocks are held for one year or less and they are therefore short-term sales. Therefore, we have:
Short-term capital gain from the first stock sales = Sales Price – Cost = $6,000 - $4,000 = $2,000
Short-term capital loss from the third stock sales = Cost – Sales price = $20,000 - $17,000 = $3,000
Net short-term capital loss = Short-term capital loss from the third stock sales Short-term capital gain from the first stock sales = $3,000 - $2,000 = $1,000
Conclusion
Therefore, the correct option is b. $3,000 net long-term capital gain and $1,000 net short-term capital loss.
