Series6 Real Exam Prep DEMO

Question 2: Mr. Cashout recently sold some mutual fund shares that he owned. The sale resulted in long-
term capital
gain income of $6,000. He also sold some shares of a stock he had purchased during the year and
realized a short-term capital gain on the sale of $2,000. The sale of another individual stock resulted
in a
short-term capital loss of $3,500. Mr. Cashout also had some bonds that he had bought at a premium
mature, resulting in a long-term capital loss of $500. What is Mr. Cashout's net capital gain or loss
from
these transactions?
A. a net long-term capital gain of $4,500
B. a net long-term capital gain of $4,000
C. a net short-term capital loss of $4,000
D. a net long-term capital gain of $8,000
Correct Answer: B
Explanation: If Mr. Cashout sold mutual fund shares for a long-term capital gain of $6,000, had bonds
that
matured that resulted in a short-term capital loss of $500, and realized a short-term capital gain of
$2,000
and a short-term capital loss of $3,500 on the sale of shares of individual stocks that he owned, he
has a
net long-term capital gain of $4,000. The long-term gains and losses are netted first: $6,000 - $500 =
$ 5500 long-term gain. Then the short-term gains and losses are netted: $2,000 - $3,500 = - $1,500.
The
short-term capital loss can be used to offset part of the long-term capital gain, resulting in a ( $5500 -
$ 1,500 =) $4,000 long-term capital gain.