Problem:
Joel has four transactions involving the sale of capital assets during the year resulting in a STCG of $5,000, a STCL of $12,000, a LTCG of $1,800 and a LTCL of $1,000. As a result of these transactions, Joel will:
A. deduct net losses of $6,200 against ordinary income.
B. deduct losses of $3,000 against ordinary income and carry $3,200 of STCL forward.
C. deduct losses of $3,000 against ordinary income and carry $3.200 of LTCL forward.
D. deduct losses of $3,000 against ordinary income and carry $3,200 of losses back two years.
Short Term Capital Loss = -7000
Long Term Capital Gain = 800
If total STCL exceed total STCG for the tax year, the excess is defined as a net short-term capital loss. If NSTCL exceeds NLTCG, the capital loss may be offset, on a dollar-for-dollar basis, against a non-corp taxpayer's ordinary income for amounts up to 3000 in any 1 year.