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This question is a part of BIF's Special Webinar series which was created to help students affected by the July 2020 CFP® Exam postponement to September 2020.
In 2020, Dominique sold the following capital assets:
- BIF stock, held for 7 years. $11,000 gain.
- A rare oil painting, owned for 20 years, for an $8,000 gain.
- IFB stock, held for 3+ years. $7,000 loss.
- FIB stock, held for 11 months. $20,000 loss.
- BFI stock, held for 3 months. $3,000 gain.
Compute Dominique’s net capital gain or loss and identify the character (long-term or short-term).
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Correct answer: $5,000 STCL
Instructor insight:
Step 1: Separate short-term from long-term:
| Short-term | Long-term |
| FIB = ($20,000) | BIF = +$11,000 |
| BFI = +$3,000 | Painting = +$8,000 |
| IFB = ($7,000) |
Step 2: Separate the long-term gains and losses further into 28%, 25%, and 0/15/20 baskets:
| Short-term | Long-term | ||
| Ordinary Income | 28% | 25% | 0/15/20 |
| FIB = ($20,000) | Painting = +$8,000 | $0 | BIF = +$11,000 |
| BFI = +$3,000 | IFB = ($7,000) | ||
Step 3: Net capital gains and losses in each basket:
| Short-term | Long-term | ||
| Ordinary Income | 28% | 25% | 0/15/20 |
| ($17,000) | $8,000 | $0 | $4,000 |
| STCL | LTCG | LTCG | |
Step 4: Net capital gains and losses in each basket:
| ($17,000) | STCL |
| $8,000 | LTCG (28%) |
| ($9,000) | |
| $4,000 | LTCG (0/15/20) |
| ($5,000) | STCL |
