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Series 7 practice questionmediumTax Implications — Capital Gains

An investor sells stock for a $15,000 long-term capital gain and has a $5,000 short-term capital loss. What is the net result?

  1. A$10,000 net long-term capital gain✓ Correct answer
  2. B$10,000 net short-term capital gain
  3. C$15,000 long-term gain, $5,000 short-term loss reported separately
  4. D$20,000 net capital gain
Explanation

Why A — $10,000 net long-term capital gain

Capital gains and losses are first netted within their categories (short-term vs. long-term), then any remaining gain or loss is netted across categories. Here, there is a $15,000 LTCG and $5,000 STCL. Netting them: $15,000 - $5,000 = $10,000 net long-term capital gain, which is taxed at the preferential LTCG rate (0%, 15%, or 20%).

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