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Required information Comprehensive Problem 07-63 (LO 07-1, LO 07-2, LO 07-3, LO 07-4) (Algo) Skip to question [The following information applies to the questions displayed

Required information

Comprehensive Problem 07-63 (LO 07-1, LO 07-2, LO 07-3, LO 07-4) (Algo)

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[The following information applies to the questions displayed below.]

During 2021, your clients, Mr. and Mrs. Howell, owned the following investment assets:

Investment Assets Date Acquired Purchase Price Brokers Commission Paid at Time of Purchase
300 shares of IBM common 11/22/2018 $ 10,470 $ 100
200 shares of IBM common 4/3/2019 43,370 300
3,000 shares of Apple preferred 12/12/2019 159,000 1,300
2,100 shares of Cisco common 8/14/2020 53,700 550
420 shares of Vanguard mutual fund 3/2/2021 15,900 No-load fund*

*No commissions are charged when no-load mutual funds are bought and sold.

Because of the downturn in the stock market, Mr. and Mrs. Howell decided to sell most of their stocks and the mutual fund in 2021 and to reinvest in municipal bonds. The following investment assets were sold in 2021:

Investment Assets Date Sold Sale Price Brokers Commission Paid at Time of Sale
300 shares of IBM common 5/6 $ 14,900 $ 100
3,000 shares of Apple preferred 10/5 222,600 2,000
2,100 shares of Cisco common 8/15 63,370 650
451 shares of Vanguard mutual fund 12/21 16,900 No-load fund*

*No commissions are charged when no-load mutual funds are bought and sold.

The Howells broker issued them a Form 1099-B showing the sales proceeds net of the commissions paid. For example, the IBM sales proceeds were reported as $14,800 on the Form 1099-B they received.

In addition to the sales reflected in the table above, the Howells provided you with the following additional information concerning 2021:

  • The Howells received a Form 1099-B from the Vanguard mutual fund reporting a $900 long-term capital gain distribution. This distribution was reinvested in 31 additional Vanguard mutual fund shares on 6/30/2021.
  • In 2014, Mrs. Howell loaned $7,200 to a friend who was starting a new multilevel marketing company called LD3. The friend declared bankruptcy in 2021, and Mrs. Howell has been notified she will not be receiving any repayment of the loan.
  • The Howells have a $3,500 short-term capital loss carryover and a $6,000 long-term capital loss carryover from prior years.
  • The Howells did not instruct their broker to sell any particular lot of IBM stock.
  • The Howells earned $3,600 in municipal bond interest, $3,600 in interest from corporate bonds, and $5,200 in qualified dividends.
  • Assume the Howells have $160,000 of wage income during the year.

Comprehensive Problem 07-63 Part c (Algo)

c. Assume the Howells short-term capital loss carryover from prior years is $83,500 rather than $3,500 as indicated above. If this is the case, how much short-term and long-term capital loss carryover remains to be carried beyond 2021 to future tax years?

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