In the current year, Norris, an individual, has $50,000 of ordinary income, a Ne
ID: 2494200 • Letter: I
Question
In the current year, Norris, an individual, has $50,000 of ordinary income, a Net Short Term Capital Loss (NSTCL) of $10,000 and a Net Long Term Capital Gain (NLTCG) of $2,800. From his capital gains and losses, Norris reports:
a.
an offset against ordinary income of $10,000
b.
an offset against ordinary income of $3,000 and a NSTCL carryforward of $7,000
c.
an offset against ordinary income of $2,800 and a NSTCL carryforward of $7,200
d.
an offset against ordinary income of $3,000 and a NSTCL carryforward of $7,200
e.
an offset against ordinary income of $3,000 and a NSTCL carryforward of $4,200
a.
an offset against ordinary income of $10,000
b.
an offset against ordinary income of $3,000 and a NSTCL carryforward of $7,000
c.
an offset against ordinary income of $2,800 and a NSTCL carryforward of $7,200
d.
an offset against ordinary income of $3,000 and a NSTCL carryforward of $7,200
e.
an offset against ordinary income of $3,000 and a NSTCL carryforward of $4,200
Explanation / Answer
Answer is option (e) an offset against ordinary income of $3,000 and a NSTCL carry forward of $4,200.
Note:
Realized capital losses are first offset against realized capital gains. Any excess losses can be deducted against ordinary income up to $3,000 ($1,500 if married filing separately) on line 13 of Form 1040.
Source:
https://www.irs.gov/