Special Webinar Question: Tax Consequences of Property Transactions

Posted by Adam Scherer, CFP®, MS

Jun 4, 2020

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

 

Topics: Practice Questions