Mr. Cashout recently sold some mutual fund shares that he owned. The sale resulted in long-term capital gain income of $6,000. He also sold some shares of a stock he had purchased during the year and realized a short-term capital gain on the sale of $2,000. The sale of another individual stock resulted in a short-term capital loss of $3,500. Mr. Cashout also had some bonds that he had bought at a premium mature, resulting in a long-term capital loss of $500. What is Mr. Cashout’s net capital gain or loss from these transactions?
Explanation
Answer: B - If Mr. Cashout sold mutual fund shares for a long-term capital gain of $6,000, had bonds that matured that resulted in a short-term capital loss of $500, and realized a short-term capital gain of $2,000 and a short-term capital loss of $3,500 on the sale of shares of individual stocks that he owned, he has a net long-term capital gain of $4,000. The long-term gains and losses are netted first: $6,000 - $500 = $5500 long-term gain. Then the short-term gains and losses are netted: $2,000 - $3,500 = -$1,500. The short-term capital loss can be used to offset part of the long-term capital gain, resulting in a ($5500 - $1,500 =) $4,000 long-term capital gain.
