Demetrius Had a $4,000 Short-Term Loss and a $3,000 Long-Term

question 34

Multiple Choice

Demetrius had a $4,000 short-term loss and a $3,000 long-term gain from a collectible,a $2,000 gain from Section 1250 unrecaptured property.What is the netting effect of these gains and losses on his 1040?

• A)$2,000 short-term loss is offset against the Section 1250 property first,then the remaining $2,000 against the collectible gain leaving $1,000 taxed at 28%.
• B)As each of these gains and losses are taxed at different rates,there is no netting of short-term and long-term gains or losses.
• C)$4,000 short-term loss is offset against the $3,000 collectible first,then the remaining $1,000 against the Section 1250 property,with a $1,000 gain taxed at 25%.
• D)The $4,000 short-term loss is allowed to be taken in total as an ordinary loss,and the net long-term gain of $5,000 is added to his 1040 and taxed at 0%,15%,or 20% depending on his regular tax bracket.

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Definitions:

Arithmetic Mean

A measure of central tendency calculated by summing all the scores and dividing by the number of scores. See Mean.

Mode

The number that occurs most often in a collection of data.

Weighted Mean

An average in which each data point contributes to the final mean with a weight that reflects its importance or frequency.

Central Tendency

A statistical measure that identifies a single value as representative of an entire distribution, with the mean, median, and mode being common examples.