CPA Regulation Reg Quiz: Apply Capital Gain And Loss Rules
20 questions · exam conditions
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Apply Capital Gain And Loss RulesQuestion 1 of 20

In 2025, Dana (married filing jointly) has $240,000 of taxable income before capital gains and losses. Dana sold stock held 19 months for a $5,000 loss and sold stock held 4 months for a $1,000 gain; Dana also sold investment land held 2 years for a $9,000 gain. What is Dana's net capital gain/loss for 2025?

Net capital gain of $5,000
Net capital gain of $10,000
Net capital loss of $5,000
Net capital gain of $4,000
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CPA Regulation Reg Quiz

CPA Regulation Reg Quiz: Apply Capital Gain And Loss Rules

Practice Apply Capital Gain And Loss Rules in CPA Regulation Reg with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Apply Capital Gain And Loss Rules, giving you a quick way to practice the rules, question types, and explanations that matter most for CPA Regulation Reg.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

In 2025, Dana (married filing jointly) has $240,000 of taxable income before capital gains and losses. Dana sold stock held 19 months for a $5,000 loss and sold stock held 4 months for a $1,000 gain; Dana also sold investment land held 2 years for a $9,000 gain. What is Dana's net capital gain/loss for 2025?

  1. Net capital gain of $5,000 (correct answer)
  2. Net capital gain of $10,000
  3. Net capital loss of $5,000
  4. Net capital gain of $4,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 19 months as a long-term loss of $5,000, stock held 4 months as a short-term gain of $1,000, and land held 2 years as a long-term gain of $9,000, resulting in a net short-term gain of $1,000 and a net long-term gain of $4,000. The correct answer of a net capital gain of $5,000 aligns with IRS guidance by combining the net short-term gain with the net long-term gain when both are positive. Choice B is incorrect because it overstates the gain by ignoring the loss; choice C wrongly calculates a loss by focusing on the long-term loss; and choice D reports a partial net incorrectly. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 2

In 2025, Riley (single) has $50,000 of taxable income before capital gains and losses. Riley sold stock held 13 months for a $6,000 gain and sold corporate bonds held 9 months for a $2,000 loss; Riley also sold investment real estate held 5 years for a $1,000 loss. What is Riley's net capital gain/loss for 2025?

  1. Net capital gain of $3,000 (correct answer)
  2. Net capital gain of $4,000
  3. Net capital loss of $3,000
  4. Net capital gain of $5,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 13 months as a long-term gain of $6,000, bonds held 9 months as a short-term loss of $2,000, and real estate held 5 years as a long-term loss of $1,000, resulting in a net short-term loss of $2,000 and a net long-term gain of $5,000. The correct answer of a net capital gain of $3,000 aligns with IRS guidance by offsetting the net short-term loss against the net long-term gain to produce an overall net gain. Choice B is incorrect because it overstates the gain by ignoring the real estate loss; choice C wrongly calculates a loss by misnetting the long-term items; and choice D incorrectly adds losses without proper offsetting. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 3

In 2025, Avery (single) has $95,000 of taxable income before capital gains and losses. During the year, Avery sold publicly traded stock held 10 months for a $6,000 gain, sold corporate bonds held 18 months for a $4,000 loss, and sold a parcel of investment real estate held 3 years for a $12,000 gain. Assuming no other capital transactions, what is Avery's net capital gain/loss for 2025?

  1. Net capital gain of $14,000 (correct answer)
  2. Net capital gain of $2,000
  3. Net capital gain of $18,000
  4. Net capital gain of $8,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 10 months as a short-term gain of $6,000, bonds held 18 months as a long-term loss of $4,000, and real estate held 3 years as a long-term gain of $12,000, resulting in a net short-term gain of $6,000 and a net long-term gain of $8,000. The correct answer of a net capital gain of $14,000 aligns with IRS guidance by combining the net short-term gain with the net long-term gain when both are positive. Choice B is incorrect because it mistakenly nets only the long-term items without including the short-term gain, while choice C incorrectly adds all gains without offsetting the loss, and choice D wrongly offsets the short-term gain against only part of the long-term items. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 4

In 2025, Quinn (single) has $105,000 of taxable income before capital gains and losses. Quinn sold stock held 9 months for a $5,500 gain and sold stock held 2 years for a $1,500 loss; Quinn also sold investment land held 12 years for a $2,000 loss. What is Quinn's net capital gain/loss for 2025?

  1. Net capital gain of $2,000 (correct answer)
  2. Net capital gain of $5,500
  3. Net capital loss of $2,000
  4. Net capital gain of $1,500
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 9 months as a short-term gain of $5,500, stock held 2 years as a long-term loss of $1,500, and land held 12 years as a long-term loss of $2,000, resulting in a net short-term gain of $5,500 and a net long-term loss of $3,500. The correct answer of a net capital gain of $2,000 aligns with IRS guidance by offsetting the net short-term gain against the net long-term loss to produce an overall net gain. Choice B is incorrect because it reports only the short-term gain without offsetting; choice C wrongly mirrors the gain as a loss; and choice D calculates an incomplete net by ignoring one loss. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 5

In 2025, Robin (single) has $65,000 of taxable income before capital gains and losses. Robin sold stock held 6 months for a $7,000 loss and sold corporate bonds held 3 years for a $2,500 gain; Robin also sold investment real estate held 2 years for a $1,500 gain. What is Robin's net capital gain/loss for 2025?

  1. Net capital loss of $3,000 (correct answer)
  2. Net capital loss of $2,000
  3. Net capital gain of $4,000
  4. Net capital loss of $7,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 6 months as a short-term loss of $7,000, bonds held 3 years as a long-term gain of $2,500, and real estate held 2 years as a long-term gain of $1,500, resulting in a net short-term loss of $7,000 and a net long-term gain of $4,000. The correct answer of a net capital loss of $3,000 aligns with IRS guidance by offsetting the net long-term gain against the net short-term loss to produce an overall net loss. Choice B is incorrect because it understates the loss; choice C wrongly calculates a gain by ignoring the larger loss; and choice D reports only the short-term loss without offsetting. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 6

In 2025, Alex (single) has $200,000 of taxable income before capital gains and losses. Alex sold stock held 2 years for a $20,000 gain and sold corporate bonds held 8 months for a $6,000 loss; Alex also sold investment land held 11 months for a $3,000 gain. What is Alex's net capital gain/loss for 2025?

  1. Net capital gain of $17,000 (correct answer)
  2. Net capital gain of $11,000
  3. Net capital gain of $14,000
  4. Net capital gain of $23,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 2 years as a long-term gain of $20,000, bonds held 8 months as a short-term loss of $6,000, and land held 11 months as a short-term gain of $3,000, resulting in a net short-term loss of $3,000 and a net long-term gain of $20,000. The correct answer of a net capital gain of $17,000 aligns with IRS guidance by offsetting the net short-term loss against the net long-term gain to produce an overall net gain. Choice B is incorrect because it understates the gain by misnetting short-term items; choice C reports an intermediate net; and choice D overstates by ignoring losses. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 7

In 2025, Parker (single) has $30,000 of taxable income before capital gains and losses. Parker sold stock held 13 months for a $2,000 loss and sold corporate bonds held 7 months for a $900 gain; Parker also sold investment land held 15 months for a $1,500 gain. What is Parker's net capital gain/loss for 2025?

  1. Net capital gain of $400 (correct answer)
  2. Net capital loss of $400
  3. Net capital gain of $2,400
  4. Net capital loss of $2,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 13 months as a long-term loss of $2,000, bonds held 7 months as a short-term gain of $900, and land held 15 months as a long-term gain of $1,500, resulting in a net short-term gain of $900 and a net long-term loss of $500. The correct answer of a net capital gain of $400 aligns with IRS guidance by offsetting the net long-term loss against the net short-term gain to produce an overall net gain. Choice B is incorrect because it mirrors the gain as a loss; choice C overstates by misnetting; and choice D reports only the stock loss without offsetting. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 8

In 2025, Pat (married filing jointly) has $300,000 of taxable income before capital gains and losses. Pat sold corporate bonds held 13 months for a $10,000 gain and sold stock held 10 months for a $4,000 loss; Pat also sold investment real estate held 2 years for a $1,000 loss. What is Pat's net capital gain/loss for 2025?

  1. Net capital gain of $5,000 (correct answer)
  2. Net capital gain of $6,000
  3. Net capital loss of $5,000
  4. Net capital gain of $10,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the bonds held 13 months as a long-term gain of $10,000, stock held 10 months as a short-term loss of $4,000, and real estate held 2 years as a long-term loss of $1,000, resulting in a net short-term loss of $4,000 and a net long-term gain of $9,000. The correct answer of a net capital gain of $5,000 aligns with IRS guidance by offsetting the net short-term loss against the net long-term gain to produce an overall net gain. Choice B is incorrect because it understates the gain by double-counting losses; choice C wrongly calculates a loss by reversing the nets; and choice D reports only the bonds gain without netting. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 9

In 2025, Jordan (head of household) has $70,000 of taxable income before capital gains and losses. Jordan sold corporate bonds held 11 months for a $3,500 gain and sold stock held 4 years for a $10,000 loss; Jordan also sold a rental condo held 2 years for a $2,000 gain. What is Jordan's net capital gain/loss for 2025?

  1. Net capital loss of $4,500 (correct answer)
  2. Net capital gain of $1,500
  3. Net capital loss of $8,000
  4. Net capital gain of $5,500
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the bonds held 11 months as a short-term gain of $3,500, stock held 4 years as a long-term loss of $10,000, and condo held 2 years as a long-term gain of $2,000, resulting in a net short-term gain of $3,500 and a net long-term loss of $8,000. The correct answer of a net capital loss of $4,500 aligns with IRS guidance by offsetting the net short-term gain against the net long-term loss to produce an overall net loss. Choice B is incorrect because it mistakenly calculates a gain by ignoring the larger long-term loss; choice C wrongly reports the full long-term loss without offsetting the short-term gain; and choice D incorrectly nets to a gain by misclassifying the condo gain. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 10

In 2025, Reese (single) has $115,000 of taxable income before capital gains and losses. Reese sold corporate bonds held 2 years for a $4,500 gain and sold stock held 9 months for a $2,500 gain; Reese also sold investment land held 6 years for a $10,000 loss. What is Reese's net capital gain/loss for 2025?

  1. Net capital loss of $3,000 (correct answer)
  2. Net capital loss of $5,500
  3. Net capital gain of $7,000
  4. Net capital gain of $2,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the bonds held 2 years as a long-term gain of $4,500, stock held 9 months as a short-term gain of $2,500, and land held 6 years as a long-term loss of $10,000, resulting in a net short-term gain of $2,500 and a net long-term loss of $5,500. The correct answer of a net capital loss of $3,000 aligns with IRS guidance by offsetting the net short-term gain against the net long-term loss to produce an overall net loss. Choice B is incorrect because it reports the long-term loss without full offsetting; choice C wrongly calculates a gain by ignoring the loss; and choice D understates the gain incorrectly. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 11

In 2025, Lee (single) has $80,000 of taxable income before capital gains and losses. Lee sold stock held 14 months for a $3,000 gain and sold corporate bonds held 6 months for a $9,000 loss; Lee also sold investment land held 3 years for a $2,000 gain. What is Lee's net capital gain/loss for 2025?

  1. Net capital loss of $4,000 (correct answer)
  2. Net capital loss of $6,000
  3. Net capital gain of $5,000
  4. Net capital gain of $4,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 14 months as a long-term gain of $3,000, bonds held 6 months as a short-term loss of $9,000, and land held 3 years as a long-term gain of $2,000, resulting in a net short-term loss of $9,000 and a net long-term gain of $5,000. The correct answer of a net capital loss of $4,000 aligns with IRS guidance by offsetting the net long-term gain against the net short-term loss to produce an overall net loss. Choice B is incorrect because it overstates the loss by ignoring the long-term gains; choice C wrongly calculates a gain by misnetting; and choice D reports an incomplete gain without full offsetting. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 12

In 2025, Drew (married filing jointly) has $160,000 of taxable income before capital gains and losses. Drew sold stock held 3 years for a $8,000 loss and sold corporate bonds held 5 months for a $2,000 gain; Drew also sold rental real estate held 4 years for a $9,000 gain. What is Drew's net capital gain/loss for 2025?

  1. Net capital gain of $3,000 (correct answer)
  2. Net capital gain of $11,000
  3. Net capital loss of $6,000
  4. Net capital gain of $1,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 3 years as a long-term loss of $8,000, bonds held 5 months as a short-term gain of $2,000, and real estate held 4 years as a long-term gain of $9,000, resulting in a net short-term gain of $2,000 and a net long-term gain of $1,000. The correct answer of a net capital gain of $3,000 aligns with IRS guidance by combining the net short-term gain with the net long-term gain when both are positive. Choice B is incorrect because it understates the gain by ignoring the short-term gain; choice C wrongly calculates a loss by focusing only on the long-term loss; and choice D reports only the long-term net without including short-term. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 13

In 2025, Chris (married filing jointly) has $180,000 of taxable income before capital gains and losses. Chris sold stock held 3 months for a $12,000 gain and sold corporate bonds held 2 years for a $7,000 loss; Chris also sold investment real estate held 9 years for a $1,000 gain. What is Chris's net capital gain/loss for 2025?

  1. Net capital gain of $6,000 (correct answer)
  2. Net capital gain of $13,000
  3. Net capital loss of $6,000
  4. Net capital gain of $5,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 3 months as a short-term gain of $12,000, bonds held 2 years as a long-term loss of $7,000, and real estate held 9 years as a long-term gain of $1,000, resulting in a net short-term gain of $12,000 and a net long-term loss of $6,000. The correct answer of a net capital gain of $6,000 aligns with IRS guidance by offsetting the net long-term loss against the net short-term gain to produce an overall net gain. Choice B is incorrect because it overstates the gain by ignoring the loss; choice C wrongly mirrors the gain as a loss; and choice D understates by partial netting. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 14

In 2025, Jamie (head of household) has $90,000 of taxable income before capital gains and losses. Jamie sold stock held 15 months for a $4,000 loss and sold corporate bonds held 5 months for a $1,500 loss; Jamie also sold investment real estate held 2 years for a $9,000 gain. What is Jamie's net capital gain/loss for 2025?

  1. Net capital gain of $3,500 (correct answer)
  2. Net capital gain of $9,000
  3. Net capital loss of $3,500
  4. Net capital gain of $5,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 15 months as a long-term loss of $4,000, bonds held 5 months as a short-term loss of $1,500, and real estate held 2 years as a long-term gain of $9,000, resulting in a net short-term loss of $1,500 and a net long-term gain of $5,000. The correct answer of a net capital gain of $3,500 aligns with IRS guidance by offsetting the net short-term loss against the net long-term gain to produce an overall net gain. Choice B is incorrect because it reports only the real estate gain without netting; choice C wrongly mirrors the gain as a loss; and choice D calculates an incomplete net. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 15

In 2025, Sam (head of household) has $120,000 of taxable income before capital gains and losses. Sam sold stock held 11 months for a $7,000 loss and sold corporate bonds held 2 years for a $3,000 loss; Sam also sold investment land held 18 months for a $15,000 gain. What is Sam's net capital gain/loss for 2025?

  1. Net capital gain of $5,000 (correct answer)
  2. Net capital gain of $15,000
  3. Net capital loss of $5,000
  4. Net capital gain of $11,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 11 months as a short-term loss of $7,000, bonds held 2 years as a long-term loss of $3,000, and land held 18 months as a long-term gain of $15,000, resulting in a net short-term loss of $7,000 and a net long-term gain of $12,000. The correct answer of a net capital gain of $5,000 aligns with IRS guidance by offsetting the net short-term loss against the net long-term gain to produce an overall net gain. Choice B is incorrect because it overstates the gain by ignoring losses; choice C wrongly calculates a loss by combining all losses without the gain; and choice D reports an intermediate net without full offsetting. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 16

In 2025, Harper (head of household) has $60,000 of taxable income before capital gains and losses. Harper sold stock held 5 months for a $2,800 loss and sold stock held 16 months for a $2,800 gain; Harper also sold investment real estate held 7 years for a $4,000 gain. What is Harper's net capital gain/loss for 2025?

  1. Net capital gain of $4,000 (correct answer)
  2. Net capital gain of $1,200
  3. Net capital gain of $6,800
  4. Net capital loss of $4,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 5 months as a short-term loss of $2,800, stock held 16 months as a long-term gain of $2,800, and real estate held 7 years as a long-term gain of $4,000, resulting in a net short-term loss of $2,800 and a net long-term gain of $6,800. The correct answer of a net capital gain of $4,000 aligns with IRS guidance by offsetting the net short-term loss against the net long-term gain to produce an overall net gain. Choice B is incorrect because it understates the gain by partial netting; choice C overstates by ignoring the loss; and choice D wrongly calculates a loss by misclassifying items. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 17

In 2025, Taylor (single) has $35,000 of taxable income before capital gains and losses. Taylor sold corporate bonds held 14 months for a $2,500 loss and sold stock held 6 months for a $1,200 gain; Taylor also sold investment real estate held 10 years for a $6,000 gain. What is Taylor's net capital gain/loss for 2025?

  1. Net capital gain of $4,700 (correct answer)
  2. Net capital gain of $2,300
  3. Net capital gain of $6,000
  4. Net capital loss of $1,300
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the bonds held 14 months as a long-term loss of $2,500, stock held 6 months as a short-term gain of $1,200, and real estate held 10 years as a long-term gain of $6,000, resulting in a net short-term gain of $1,200 and a net long-term gain of $3,500. The correct answer of a net capital gain of $4,700 aligns with IRS guidance by combining the net short-term gain with the net long-term gain when both are positive. Choice B is incorrect because it understates the gain by ignoring the short-term gain; choice C wrongly reports only the real estate gain without netting; and choice D calculates a loss by misclassifying the real estate. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 18

In 2025, Bailey (single) has $45,000 of taxable income before capital gains and losses. Bailey sold corporate bonds held 12 months for a $5,000 gain and sold stock held 11 months for a $1,000 gain; Bailey also sold investment land held 2 years for a $3,000 loss. What is Bailey's net capital gain/loss for 2025?

  1. Net capital gain of $3,000 (correct answer)
  2. Net capital gain of $1,000
  3. Net capital gain of $7,000
  4. Net capital loss of $3,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the bonds held 12 months as a gain of $5,000 (short-term if exactly one year, but netting yields same result as long-term), stock held 11 months as a short-term gain of $1,000, and land held 2 years as a long-term loss of $3,000, resulting in a net gain of $3,000 regardless of exact bonds classification. The correct answer of a net capital gain of $3,000 aligns with IRS guidance by properly offsetting the gains against the long-term loss after category netting. Choice B is incorrect because it understates the gain by ignoring part of the gains; choice C overstates by not offsetting the loss; and choice D wrongly calculates a loss by reversing the nets. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 19

In 2025, Leslie (head of household) has $110,000 of taxable income before capital gains and losses. Leslie sold corporate bonds held 10 months for a $3,000 gain and sold stock held 2 years for a $8,000 gain; Leslie also sold investment real estate held 8 years for a $6,000 loss. What is Leslie's net capital gain/loss for 2025?

  1. Net capital gain of $5,000 (correct answer)
  2. Net capital gain of $11,000
  3. Net capital loss of $5,000
  4. Net capital gain of $2,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the bonds held 10 months as a short-term gain of $3,000, stock held 2 years as a long-term gain of $8,000, and real estate held 8 years as a long-term loss of $6,000, resulting in a net short-term gain of $3,000 and a net long-term gain of $2,000. The correct answer of a net capital gain of $5,000 aligns with IRS guidance by combining the net short-term gain with the net long-term gain when both are positive. Choice B is incorrect because it overstates the gain by ignoring the loss; choice C wrongly calculates a loss by reversing the nets; and choice D reports only the long-term net. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.

Question 20

In 2025, Sidney (married filing jointly) has $155,000 of taxable income before capital gains and losses. Sidney sold stock held 11 months for a $6,000 gain and sold corporate bonds held 14 months for a $6,000 loss; Sidney also sold investment real estate held 3 years for a $2,000 gain. What is Sidney's net capital gain/loss for 2025?

  1. Net capital gain of $2,000 (correct answer)
  2. Net capital gain of $6,000
  3. Net capital loss of $2,000
  4. Net capital gain of $8,000
Explanation: The capital gain and loss rules tested here involve classifying gains and losses as short-term or long-term based on holding periods and netting them accordingly to determine the net capital gain or loss. Key facts include the stock held 11 months as a short-term gain of $6,000, bonds held 14 months as a long-term loss of $6,000, and real estate held 3 years as a long-term gain of $2,000, resulting in a net short-term gain of $6,000 and a net long-term loss of $4,000. The correct answer of a net capital gain of $2,000 aligns with IRS guidance by offsetting the net long-term loss against the net short-term gain to produce an overall net gain. Choice B is incorrect because it reports an unnetted amount; choice C wrongly mirrors the gain as a loss; and choice D overstates by ignoring losses. To apply capital gain and loss rules in similar scenarios, first categorize each transaction by holding period—short-term for one year or less, long-term for more than one year—and compute separate nets for each category. Then, offset any opposing nets between short-term and long-term to arrive at the overall net capital gain or loss, ensuring compliance with IRS netting procedures.