ExpertEasy1 markMultiple Choice
CPA · Question 35 · Area IV: Property Transactions
A taxpayer has a short-term capital loss of $10,000 and a long-term capital gain of $4,000 in Year 1. The taxpayer also has $60,000 of ordinary income. What is the taxpayer's AGI for Year 1?
A taxpayer has a short-term capital loss of $10,000 and a long-term capital gain of $4,000 in Year 1. The taxpayer also has $60,000 of ordinary income. What is the taxpayer's AGI for Year 1?
Answer options:
A.
$54,000
B.
$60,000
C.
$57,000
D.
$50,000
How to approach this question
1. Net ST and LT items ($10k loss + $4k gain = $6k net loss). 2. Limit deduction against ordinary income to $3,000. 3. Subtract from Ordinary Income.
Full Answer
C.$57,000✓ Correct
IRC §1211. Net capital loss is $6,000. Only $3,000 is deductible in the current year. The remaining $3,000 is carried forward. AGI = $60,000 - $3,000 = $57,000.
Common mistakes
Deducting the full net loss; failing to net ST and LT first.
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