An individual bought 200 shares of stock in a company for $80 per share in Janua

Question

An individual bought 200 shares of stock in a company for $80 per share in January. By September of that year, the stock had declined to $50 per share, whereupon the individual sold 100 shares and held the other 100 shares. In November of that year, the stock returned to $78 per share, and the individual sold the remaining 100 shares.
  
Assume the shares paid no dividends during the course of the year.
  
What is the maximum amount this individual can deduct as a capital loss when preparing this year’s tax return?

Explanation / Answer

Answer:

Cost of 200 shares @ 80 per share 16,000

Sale proceeds of 100 shares @ $ 50 each 5,000

Sale proceeds of remaining 100 shares $ 78 each 7,800

Total sale prceeds 12,800

Short Term Capital Loss 3,200

(The shares are held for less than 1 year)

Out of this maximum of $ 3,000 is deductile as offset against other income and balance $ 200 to be carried forard to following year. In case, other income is less than $ 3,000 then the amount remaining after offset will be carried over.

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