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Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents. The couple received salary income of

Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents. The couple received salary income of $100,000 and qualified business income of $10,000 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $200,000 and they sold it for $250,000. The gain on the sale qualified for the exclusion from the sale of a principle residence. The Jacksons incurred $16,500 of itemized deductions (no charitable contributions), and they had $1,000 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice is 18 years of age at year-end, the Jacksons may claim a child tax credit for other qualifying dependents for Candice.

Assume the original facts but now suppose the Jackson also incurred a loss of $5,000 on the sale of some of their investment assets. What effect does the $5,000 loss have on their taxable income?

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