In 2012, Betty (head of household with three dependents) had a $28,000 loss from the sale of a personal residence. She also purchased from an individual inventor for $18,000 (and resold in two months for $7,000) a patent on a rubber bonding process. The patent had not yet been reduced to practice. Betty purchased the patent as an investment. In addition, she had the following capital gains and losses from stock transactions:
|
Long term capital loss |
($ 6,000) |
|
Long term capital loss carryover from 2011 |
(12,000) |
|
Short term capital gain |
21,000 |
|
Short term capital loss |
(7,000) |
What is Betty’s net capital gain or loss? Draft a letter to Betty explaining the tax treatment of the sale of her personal residence. Assume that Betty’s income from other sources puts her in the 35% bracket. Betty’s address is 1120 West Street, Ashland, OR 97520.