ExpertHard1 markMultiple Choice
CPA · Question 50 · Area IV: Individual Taxation
A taxpayer has a $3,000 short-term capital loss and a $2,000 long-term capital gain in the current year. The taxpayer also has $50,000 of ordinary income. What is the taxpayer's Adjusted Gross Income (AGI)?
A taxpayer has a $3,000 short-term capital loss and a $2,000 long-term capital gain in the current year. The taxpayer also has $50,000 of ordinary income. What is the taxpayer's Adjusted Gross Income (AGI)?
Answer options:
A.
$50,000
B.
$47,000
C.
$49,000
D.
$48,000
How to approach this question
1. Net ST and LT ($3k loss + $2k gain = $1k Net ST Loss). 2. Deduct up to $3,000 against ordinary income. 3. Calculate AGI.
Full Answer
C.$49,000✓ Correct
Net capital loss = ($3,000) ST + $2,000 LT = ($1,000) Net STCL. Up to $3,000 of net capital loss is deductible against ordinary income. $50,000 - $1,000 = $49,000.
Common mistakes
Deducting the loss before netting with the gain.
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