In December 2017, Zack comes to you for tax advice. Zack is in the 39.6% margina
ID: 2797339 • Letter: I
Question
In December 2017, Zack comes to you for tax advice. Zack is in the 39.6% marginal tax bracket (taxable income of $450,000 from wages). Zack sold some shares of GE stock in May 2017, and the sale resulted in a STCG of $5,000. This was Zack's only property transaction to date in 2017. Zack's goal is to minimize his 2017 tax liability as much as possible while selling as few assets as possible. He does not want to generate any capital losses that he cannot use in 2017 (i.e. do not generate a NCL carryover) Zack owns the following assets as of December 2017: Tesla Stock (FMV = $12,000, AB = $6,000. HP = 2 years) Snapchat Stock (FMV = $7,000, AB = $10,000. HP = 3 years) Wells Fargo Stock (FMV = $6,000. AB = $11,000. HP = 10 months) Coca-Cola Stock (FMV = $10,000, AB = $6,000. HP = 6 months) . · Twitter Stock (FMV = $15,000, AB » A personal-use automobile » A personal-use motorcycle $25,000, HP-2 years) (FMV- $23,000, AB $28,000, HP 1 year) (FMV $15,000, AB-$5,000. HP-3 years) Which asset(s), if any, would you advise Zack to sell in 2017 in order to achieve his objectives? Assume all sales will be at FMV, and, if Zack sells a company's stock, he will sell all shares of that company's stock (e.g. if Zack sells the Tesla stock, he will sell all of his shares for $12,000)Explanation / Answer
Zack has s short term capital gain (STCG) of $5,000. As per tax laws STCG can be adjusted against short term capital loss.
My advice to Zack is to sell his Wells Fargo stock. STCL = AB-FMV = 11,000 – 6,000 = $5,000.
As HP = 10 months this loss will be classified as a short term capital loss.
This loss will be completely adjusted against Zack’s STCG of $5,000.