What are the tax implications of Meher's capital gains and losses from his investments?

What are the tax implications of Meher's capital gains and losses from his investments?

• A. Taxable capital gain on Investment X of $1,750, allowable capital loss on Investment Y of $1,900, with a net allowable capital loss of $150.
• B. Taxable capital gain on Investment X of $3,500, with a carry forward option for the loss.
• C. No capital gains or losses applicable to Meher's income.
• D. Taxable capital gain on both investments.

Answer: (A)

The answer indicating a taxable capital gain on Investment X of $1,750, an allowable capital loss on Investment Y of $1,900, leading to a net allowable capital loss of $150 is correct due to the specific treatment of capital gains and losses within tax law. In this scenario, when an individual realizes capital gains from one investment and capital losses from another, the IRS allows taxpayers to offset their gains with their losses. The gain from Investment X is $1,750, which is the profit made from selling that investment. Investment Y, however, has incurred a loss of $1,900. By subtracting the loss from the gain, we arrive at a net capital loss of $150. This means that while there is a taxable gain, the overall effect is a capital loss, which can be used to offset taxable income in the current tax year or potentially carried forward to future tax years depending on the tax regulations. This framework allows Meher to strategically manage his tax obligations by utilizing the losses to mitigate gains, ultimately resulting in a lower taxable income. The allowable capital loss can help reduce his overall tax liability when filing his tax return. In contrast, other options are incorrect because they either misrepresent the nature of capital gains and

The answer indicating a taxable capital gain on Investment X of $1,750, an allowable capital loss on Investment Y of $1,900, leading to a net allowable capital loss of $150 is correct due to the specific treatment of capital gains and losses within tax law.

In this scenario, when an individual realizes capital gains from one investment and capital losses from another, the IRS allows taxpayers to offset their gains with their losses. The gain from Investment X is $1,750, which is the profit made from selling that investment. Investment Y, however, has incurred a loss of $1,900. By subtracting the loss from the gain, we arrive at a net capital loss of $150. This means that while there is a taxable gain, the overall effect is a capital loss, which can be used to offset taxable income in the current tax year or potentially carried forward to future tax years depending on the tax regulations.

This framework allows Meher to strategically manage his tax obligations by utilizing the losses to mitigate gains, ultimately resulting in a lower taxable income. The allowable capital loss can help reduce his overall tax liability when filing his tax return.

In contrast, other options are incorrect because they either misrepresent the nature of capital gains and