[asdf]

Here is the question.

Martin, an unmarried physical therapist, had the following capital gains and losses in Year 3 and Year 4.
Year 3
Net short‐term loss ($4,500)
Net long‐term gain $ 500
Year 4
Net long‐term gain $ 500
Net short‐term loss ($900)
What is the capital loss amount that can be carried over to Year4?

and the answer is $1,000
Martin’s net capital loss carryover for Year 4 is determined as follows.
Net short‐term loss for Year 3: $(4,500)
Net long‐term gain for Year 3: 500
Capital loss for Year 3: $ (4,000)
Maximum amount of ordinary income that may be offset by capital losses: 3,000
Net short‐term capital loss carried over to Year 4: $(1,000)

I understand loss is deductible up to capital gain and additional $3,000 against ORDINARY INCOME. However, I don’t see any reasonable clue to make an assumption that Martin actually had any ORDINARY INCOME more than $3,000 in the question. What if he didn’t have any ordinary income? Then the answer would be different, wouldn’t it? Am I understanding in a wrong way? or Am I having wrong definition about ordinary income (which I thought it is his business related income)

[kp.patel216]

I remember thinking the same thing, I guess just assume they have ordinary income unless stated otherwise. So for year 4 they have a $1400 ordinary loss.

[asdf]

Thank you!!!!! @Kp.patel216

[Author]

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