Taxpayer has recognized Short Term Capital Gains of $100,000 in the current year (year 1). Taxpayer will recognize Long Term Capital Gains of $150,000 in the next year (year 2). Taxpayer has unrealized capital losses in her portfolio of $75,000. Assume that the taxpayer is in the highest marginal tax bracket for ordinary income and the highest tax bracket for capital gains.

Question: 1.a. Determine (quantify) the income tax consequences of two scenarios. Ignore the NIIT impact. Taxpayer disposes of the capital loss assets in year 1 and recognizes the loss (scenario 1) or taxpayer disposes of the capital loss asset in year 2 and recognizes the loss (Scenario 2).

Question 1.b. What is the total amount of the NIIT for both tax years (year 1 and year 2) in both scenarios?

Question 1.c. What would recommend to taxpayer regarding what year, if any, is optimal for disposing the capital loss investment?