Problem 8-3 What is a Capital Asset?, Holding Period, Calculation of Gain or Loss, Net Capital Losses (LO 8.1, 8.2, 8.3, 8.5)

Charu Khanna received a Form 1099-B showing the following stock transactions and basis during 2016:

Stock	Date Purchased	Date Sold	Sales Price	Cost Basis
4,000 shares Green Co.	06/04/05	08/05/16	$12,000	$3,000
500 shares Gold Co.	02/12/16	09/05/16	54,000	62,000
5,000 shares Blue Co.	02/04/06	10/08/16	18,000	22,000
100 shares Orange Co.	11/15/15	07/12/16	19,000	18,000

None of the stock is qualified small business stock. The stock basis was reported to the IRS.

Calculate Charu's net capital gain or loss using Schedule D and Form 8949.

Note: If required, enter a "loss" as a negative number on the tax form. Do not enter deductions as negative numbers. If an amount is zero, enter "0". If the answer is "Not applicable", select NA from the drop-down list.

SCHEDULE D (Form 1040) Department of the Treasury Internal Revenue Service (99)	Capital Gains and Losses Attach to Form 1040 or Form 1040NR. Information about Schedule D and its separate instructions is at www.irs.gov/scheduled. Use Form 8949 to list your transactions for lines 1b, 2, 3, 8b, 9, and 10.	OMB No. 1545-0074
		2016 Attachment Sequence No. 12

Name(s) shown on return Charu Khanna

Your social security number

Part I

Short-Term Capital Gains and LossesAssets Held One Year or Less

See instructions for how to figure the amounts to enter on the lines below.		(d) Proceeds (sales price)	(e) Cost (or other basis)	(g) Adjustments to gain or loss from Form(s) 8949, Part I, line 2, column (g)		(h) Gain or (loss)Subtract column (e) from column (d) and combine the result with column (g)
This form may be easier to complete if you round off cents to whole dollars.
1a	Totals for all short-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 8949, leave this line blank and go to line 1b . . . . . . . . . . . . . . . . . . . . .
1b	Totals for all transactions reported on Form(s) 8949 with Box Achecked . . . . . . . . . . . . . . . . . . . . . . . . . . .
2	Totals for all transactions reported on Form(s) 8949 with Box Bchecked . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3	Totals for all transactions reported on Form(s) 8949 with Box Cchecked . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4	Short-term gain from Form 6252 and short-term gain or (loss) from Forms 4684, 6781, and 8824 . . .				4
5	Net short-term gain or (loss) from partnerships, S corporations, estates, and trusts from Schedule(s) K-1				5
6	Short-term capital loss carryover. Enter the amount, if any, from line 8 of your Capital Loss Carryover Worksheet in the instructions . . . . . . . . . . . . . . . . . . . . . . . .				6	()
7	Net short-term capital gain or (loss). Combine lines 1a through 6 in column (h). If you have any long-term capital gains or losses, go to Part II below. Otherwise, go to Part III on the back				7

Part II

Long-Term Capital Gains and LossesAssets Held More Than One Year

See instructions for how to figure the amounts to enter on the lines below.		(d) Proceeds (sales price)	(e) Cost (or other basis)	(g) Adjustments to gain or loss from Form(s) 8949, Part II, line 2, column (g)		(h) Gain or (loss)Subtract column (e) from column (d) and combine the result with column (g)
This form may be easier to complete if you round off cents to whole dollars.
8a	Totals for all long-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 8949, leave this line blank and go to line 8b . . . . . . . . . . . . . . . . . . . .
8b	Totals for all transactions reported on Form(s) 8949 with Box Dchecked . . . . . . . . . . . . . . . . . . . . . . . . . .
9	Totals for all transactions reported on Form(s) 8949 with Box Echecked . . . . . . . . . . . . . . . . . . . . . . . . .
10	Totals for all transactions reported on Form(s) 8949 with Box Fchecked . . . . . . . . . . . . . . . . . . . . . . . . . . .
11	Gain from Form 4797, Part I; long-term gain from Forms 2439 and 6252; and long-term gain or (loss) from Forms 4684, 6781, and 8824 . . . . . . . . . . . . . . . . . . . . . . . .				11
12	Net long-term gain or (loss) from partnerships, S corporations, estates, and trusts from Schedule(s) K-1				12
13	Capital gain distributions. See the instructions . . . . . . . . . . . . . . . . . . . . .				13
14	Long-term capital loss carryover. Enter the amount, if any, from line 13 of your Capital Loss Carryover Worksheet in the instructions . . . . . . . . . . . . . . . . . . . . . .				14	()
15	Net long-term capital gain or (loss). Combine lines 8a through 14 in column (h). Then go to Part III on the back . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .				15

For Paperwork Reduction Act Notice, see your tax return instructions.

Cat. No. 11338H

Schedule D (Form 1040) 2016

Schedule D (Form 1040) 2016

Charu Khanna

Page 2

Part III

Summary

16

Combine lines 7 and 15 and enter the result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

If line 16 is a gain, enter the amount from line 16 on Form 1040, line 13, or Form 1040NR, line 14. Then go to line 17 below.

If line 16 is a loss, skip lines 17 through 20 below. Then go to line 21. Also be sure to complete line 22.

If line 16 is zero, skip lines 17 through 21 below and enter -0- on Form 1040, line 13, or Form 1040NR, line 14. Then go to line 22.

17

Are lines 15 and 16 both gains? Yes. Go to line 18. No. Skip lines 18 through 21, and go to line 22.

18

Enter the amount, if any, from line 7 of the 28% Rate Gain Worksheet in the instructions

18

19

Enter the amount, if any, from line 18 of the Unrecaptured Section 1250 Gain Worksheetin the instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

20

Are lines 18 and 19 both zero or blank?

	Yes. Complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040, line 44 (or in the instructions for Form 1040NR, line 42). Don't complete lines 21 and 22 below.
	No. Complete the Schedule D Tax Worksheet in the instructions. Don't complete lines 21 and 22 below.

21

If line 16 is a loss, enter here and on Form 1040, line 13, or Form 1040NR, line 14, the smaller of:

The loss on line 16 or

($3,000), or if married filing separately, ($1,500)

}

. . . . . . . . . . . . . . . . . . . . . . . . .

21

()

Note. When figuring which amount is smaller, treat both amounts as positive numbers.

22

Do you have qualified dividends on Form 1040, line 9b, or Form 1040NR, line 10b?

	Yes. Complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040, line 44 (or in the instructions for Form 1040NR, line 42).
	No. Complete the rest of Form 1040 or Form 1040NR.

Schedule D (Form 1040) 2016

Form 8949 Department of the Treasury Internal Revenue Service	Sales and Other Dispositions of Capital Assets Information about Form 8949 and its separate instructions is at www.irs.gov/form8949. File with your Schedule D to list your transactions for lines 1b, 2, 3, 8b, 9, and 10 of Schedule D.	OMB No. 1545-0074
		2016 Attachment Sequence No. 12A

Name(s) shown on return Charu Khanna

Social security number or taxpayer identification number

Before you check Box A, B, or C below, see whether you received any Form(s) 1099-B or substitute statement(s) from your broker. A substitute statement will have the same information as Form 1099-B. Either will show whether your basis (usually your cost) was reported to the IRS by your broker and may even tell you which box to check.

Part I	Short-Term. Transactions involving capital assets you held 1 year or less are short term. For long-term transactions, see page 2.
	Note: You may aggregate all short-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS and for which no adjustments or codes are required. Enter the totals directly on Schedule D, line 1a; you aren't required to report these transactions on Form 8949 (see instructions).

You must check Box A, B, or C below. Check only one box. If more than one box applies for your short-term transactions, complete a separate Form 8949, page 1, for each applicable box. If you have more short-term transactions than will fit on this page for one or more of the boxes, complete as many forms with the same box checked as you need.

(A) Short-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS (see Note above)

(B) Short-term transactions reported on Form(s) 1099-B showing basis wasn't reported to the IRS

(C) Short-term transactions not reported to you on Form 1099-B

1	(a) Description of property (Example: 100 sh. XYZ Co.)	(b) Date acquired (Mo., day, yr.)	(c) Date sold or disposed (Mo., day, yr.)	(d) Proceeds (sales price) (see instructions)	(e) Cost or other basis. See the Note below and see Column (e) in the separate instructions	Adjustment, if any, to gain or loss. If you enter an amount in column (g), enter a code in column (f). See the separate instructions.		(h) Gain or (loss).Subtract column (e) from column (d) and combine the result with column (g)
						(f) Code(s) from instructions	(g) Amount of adjustment
2	Totals. Add the amounts in columns (d), (e), (g), and (h) (subtract negative amounts). Enter each total here and include on your Schedule D, line 1b (if Box A above is checked), line 2 (if Box Babove is checked), or line 3 (if Box C above is checked)
Note: If you checked Box A above but the basis reported to the IRS was incorrect, enter in column (e) the basis as reported to the IRS, and enter an adjustment in column (g) to correct the basis. See Column (g) in the separate instructions for how to figure the amount of the adjustment.

For Paperwork Reduction Act Notice, see instructions.

Cat. No. 37768Z

Form 8949 (2016)

Form 8949 (2016)

Attachment Sequence No. 12A

Page 2

Name(s) shown on return. Name and SSN or taxpayer identification no. not required if shown on other side Charu Khanna	Social security number or taxpayer identification number
Before you check Box D, E, or F below, see whether you received any Form(s) 1099-B or substitute statement(s) from your broker. A substitute statement will have the same information as Form 1099-B. Either will show whether your basis (usually your cost) was reported to the IRS by your broker and may even tell you which box to check.

Part II	Long-Term. Transactions involving capital assets you held more than 1 year are long term. For short-term transactions, see page 1.
	Note: You may aggregate all long-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS and for which no adjustments or codes are required. Enter the totals directly on Schedule D, line 8a; you aren't required to report these transactions on Form 8949 (see instructions).
You must check Box D, E, or F below. Check only one box. If more than one box applies for your long-term transactions, complete a separate Form 8949, page 2, for each applicable box. If you have more long-term transactions than will fit on this page for one or more of the boxes, complete as many forms with the same box checked as you need.
(D)	Long-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS (see Note above)
(E)	Long-term transactions reported on Form(s) 1099-B showing basis wasn't reported to the IRS
(F)	Long-term transactions not reported to you on Form 1099-B

1	(a) Description of property (Example: 100 sh. XYZ Co.)	(b) Date acquired (Mo., day, yr.)	(c) Date sold or disposed (Mo., day, yr.)	(d) Proceeds (sales price) (see instructions)	(e) Cost or other basis. See the Note below and see Column (e) in the separate instructions	Adjustment, if any, to gain or loss. If you enter an amount in column (g), enter a code in column (f). See the separate instructions.		(h) Gain or (loss).Subtract column (e) from column (d) and combine the result with column (g)
						(f) Code(s) from instructions	(g) Amount of adjustment
2	Totals. Add the amounts in columns (d), (e), (g), and (h) (subtract negative amounts). Enter each total here and include on your Schedule D, line 8b (if Box D above is checked), line 9 (if Box Eabove is checked), or line 10 (if Box F above is checked)
Note: If you checked Box D above but the basis reported to the IRS was incorrect, enter in column (e) the basis as reported to the IRS, and enter an adjustment in column (g) to correct the basis. See Column (g) in the separate instructions for how to figure the amount of the adjustment.