I. The short-term gain is fully taxable
II. $3,000 of capital loss is deductible against earned income
III. There is a long-term loss carried forward of $2,000
IV. There is no loss carried forward
A. I & III
B. I & IV
C. II & III
D. I, II, & III
Correct answer: C
The gain and the loss are netted and result in a $5,000 long-term loss. $3,000 of that can be used in the current year as a deduction against earned income, and there will be a carry forward of $2,000.
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