Which of the following statements is true if a taxpayer has a net long-term capital gain of $7,000 and a net short-term capital loss of $5,000?

Multiple Choice

• $7,000 taxed at a preferential 0, 15, or 20 percent rate and $5,000 deduction against ordinary income.

• $7,000 taxed at a preferential 0, 15, or 20 percent rate and $3,000 deduction against ordinary income. $2,000 of the loss carries over to next year.

• $2,000 taxed a preferential 0, 15, or 20 percent rate.