Question

n 2021, Beth Jarow had a $28,000 loss from the sale of a personal residence. She also purchased from an individual inventor for $7,000 (and resold it in two months for $18,000) a patent on a rubber bonding process. The patent had not yet been reduced to practice. Beth purchased the patent as an investment. In addition, she had the following capital gains and losses from stock transactions: Long-term capital loss ($6,000) Long-term capital loss carryover from 2020 (12,000) Short-term capital gain 21,000 Short-term capital loss (7,000) a. What is Beth's net capital gain or loss

Answer 1

Beth Jarow's net capital gain is $16,000.

Beth is not entitled to claim capital loss on the sale of her personal residence.  But she would pay capital gain if the sale were profitable.

Data and Calculations:

Loss on sale of personal residence = $28,000

Gain from sale of patent = $11,000 ($18,000 - $7,000)

Other short-term capital gains and losses:

Short-term capital gain       21,000

Short-term capital loss        (7,000)

Total short-term gain =  $25,000

Long-term capital gains and losses:

Long-term capital loss                ($6,000)

Long-term capital loss carryover (3,000) limit for the year

Total long-term capital losses   ($9,000)

Net capital gain or loss = $16,000 ($25,000 - $9,000)

Thus, the capital loss carryover limit for the year is $3,000.  She will carry forward the remaining $9,000 over the next years.

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