SAT High School

Determine the net effect on Tamara’s adjusted gross income with regard to these capital asset transactions that occurred this year. With explaination.

• Sold ABC Co. Stock, acquired 2 years ago, for a $1,500 loss.

• Sold collectible coins, held for 17 months, for a $2,000 gain.

• Sold XYZ Co. Shares, acquired 6 months ago, for a $4,100 loss.

• Sold LMN Co. Stock, acquired 3 years ago, for a $500 gain

Answers

Answer 1

Capital assets are properties held for investment, personal use, or used in a trade or business. The capital gains and losses arising from the sale of capital assets have an impact on adjusted gross income.

Adjusted gross income (AGI) is the taxable income after allowing for all allowable deductions. Tamara's net effect on adjusted gross income with regard to the capital asset transactions is explained below:Tamara's capital asset transactions are as follows:Sold ABC Co. Stock, acquired 2 years ago, for a $1,500 loss.Sold collectible coins, held for 17 months, for a $2,000 gain.Sold XYZ Co.

Tamara's net capital loss of $100 will reduce her taxable income by $100 and her tax liability by up to $15. Tamara's taxable income, tax liability, and adjusted gross income will all be affected by the capital asset transactions.

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