Jason has three capital transactions for the current year: Short-term capital lo

Question

Jason has three capital transactions for the current year: Short-term capital loss of $5,000 Short-term capital gain of $3,000 .Long-term capital loss of $2,000 What is the net effect on Jason's taxes if he is in the 35% tax bracket? a. $1,400 tax reduction. b. $1,050 tax reduction. $850 tax reduction. d. $450 tax reduction. Which of the following statements is true regarding refundable tax credits? a. There are more refundable tax credits than nonrefundable credits. b. Refundable tax credits can be used only to reduce or eliminate the current year's tax. C. Refundable tax credits can generate a tax refund. d. For federal income tax purposes, refundable credits are used before nonrefundable credits.

Explanation / Answer

Net Short term Capital loss :- 2000

Net Long term capital Loss :- 2000

There is 4000 loss, however only 3000 loss can be used to offset income and the rest is a carry over to the next year.

Therefore 3000 loss will result in a 1050 reduction in tax.

so Answer will be "B"

C. Refundable tax credit can genrate tax refund.

All other options are not true, because RTC are used after NRTC; NRTC are more than RTC etc.

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