Billy Luker made several stock sales during 2020. Determine the net capital gain or loss for the following transactions: Date Purchased Cost Date Sold Sales Price 1-1-20 $ 4,000 6-2-20 $ 6,000 7-6-19 10,000 7-7-20 14,000 7-6-19 20,000 7-6-20 17,000 4-3-19 5,000 6-2-20 4,000 $2,000 net short-term capital gain. $2,000 net capital gain. $3,000 net long-term capital gain and $1,000 net short-term capital loss.

The correst option is b. $3,000 net long-term capital gain and $1,000 net short-term capital loss.

Explanation:

Note: This question is not comple and the data in it are merged together. The complete question withe sorted data are therefore provided before answering the question as follows:

Billy luker made several stock sales during 2018. determine the overall result of the following transactions:

Date Purchased       Cost               Date Sold            Sales Price

       1-1-20               $4,000                6-2-20                 $6,000

       7-6-19               10,000                 7-7-20                  14,000

       7-6-19              20,000                 7-6-20                  17,000

       4-3-19                5,000                 6-2-20                   4,000

a. $2,000 net short-term capital gain.

b. $3,000 net long-term capital gain and $1,000 net short-term capital loss. c. $2,000 net long-term capital gain.

d. $4,000 net long-term capital gain and $2,000 net short-term capital loss.

The explanation to answer is now given as follows:

Step 1: Calculation of net long-term capital gain/loss

Gains and losses that occurred from the sale or exchange of capital assets that are held for more than one year are referred to as long-term capital gains and losses.

From the question, the second and fourth stocks are held for more than one year and they are therefore long-term sales. Therefore, we have:

Long-term capital gain from the second stock sales = Sales Price – Cost = $14,000 - $10,000 = $4,000

Long-term capital loss from the fourth stock sales = Cost – Sales price = $5,000 - $4,000 = $1,000

Net long-term capital gain = Long-term capital gain from the second stock sales - Long-term capital loss from the fourth stock sales = $4,000 - $1,000 = $3,000

Step 2: Calculation of net short-term capital gain/loss

Gains and losses that occurred from the sale or exchange of capital assets that are held for one year or less are referred to as short-term capital gains and losses.

From the question, the first and third stocks are held for one year or less and they are therefore short-term sales. Therefore, we have:

Short-term capital gain from the first stock sales = Sales Price – Cost = $6,000 - $4,000 = $2,000

Short-term capital loss from the third stock sales = Cost – Sales price = $20,000 - $17,000 = $3,000

Net short-term capital loss = Short-term capital loss from the third stock sales Short-term capital gain from the first stock sales = $3,000 - $2,000 = $1,000

Conclusion

Therefore, the correct option is b. $3,000 net long-term capital gain and $1,000 net short-term capital loss.

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