If Betty Ann and Bart sell their Union Motor stock this year, how much could the
ID: 2802141 • Letter: I
Question
If Betty Ann and Bart sell their Union Motor stock this year, how much could they deduct? Explain your response.
Tax Item
Amount
Bart’s Earnings
$110,000
Betty Ann’s Earnings
$125,000
Federal Tax Withholdings
$22,700
State Income Tax Withholdings
$10,750
FICA & M/C
$17,978
Savings Account Interest (3.0% per year)
$3,200
State Refund from Prior Year
$2,425
Home Mortgage Interest Paid
$12,500
Real Estate Taxes Paid
$24,000
Charitable Contributions
$3,000
Unreimbursed Medical Expenses
$1,800
Stock Ownership: United Motor Company (purchased 9 months ago & which they still hold)
Current Value: $4,000
Cost basis: $8,000
Whole Life Insurance Policy
Face Value: $1,000,000
Cash Value: $15,000
Owner: Bart
Beneficiary: Betty Ann
Insured: Bart
Policy Dividend: $300
Tax Item
Amount
Bart’s Earnings
$110,000
Betty Ann’s Earnings
$125,000
Federal Tax Withholdings
$22,700
State Income Tax Withholdings
$10,750
FICA & M/C
$17,978
Savings Account Interest (3.0% per year)
$3,200
State Refund from Prior Year
$2,425
Home Mortgage Interest Paid
$12,500
Real Estate Taxes Paid
$24,000
Charitable Contributions
$3,000
Unreimbursed Medical Expenses
$1,800
Stock Ownership: United Motor Company (purchased 9 months ago & which they still hold)
Current Value: $4,000
Cost basis: $8,000
Whole Life Insurance Policy
Face Value: $1,000,000
Cash Value: $15,000
Owner: Bart
Beneficiary: Betty Ann
Insured: Bart
Policy Dividend: $300
Explanation / Answer
The total capital loss is equal to : current value - cost basis
Capital loss: $4000 - $8000 = - $4000
If they are filing jointly, then the maximum capital loss claimed by them in one year is $3000. If they are filing indepedently, they can claim a capital loss of $1500 at maximum.