P1-U07 · PART 1 · SOURCE CYCLE 2026-2027
Capital Gains and Losses
How to complete this unit
This unit uses 21 source-gated recall cards and 21 admissible practice questions. Complete the sequence in order; the unreleased wiki prose remains outside the learner path.
- 1 · LearnBuild the rule
Answer each recall prompt before opening it. Then learn the exact rule, test the controlling facts through four quick challenges, explore common questions, and finish with one own-words teach-back.
- 2 · ApplyUse it in context
Complete at least 20 mapped questions over two sessions. Review the explanation even when the answer is correct.
- 3 · ProveTest readiness
Use the Part 1 mock under time pressure. Return here for every flagged or missed concept before the next attempt.
Verified recall questions
Only cards whose complete question and answer were checked against exact primary-authority evidence appear here. Stable unit ownership gathers this lesson across 1 textbook collection.
Q1.When does the wash-sale rule generally disallow a stock or securities loss?
When substantially identical stock or securities are acquired within 30 days before or after the loss sale.
Q2.How is a digital asset treated for federal income tax purposes?
As property; the general tax principles for property transactions apply.
Q3.Recall the rule for this EA objective in Income And Assets: Basis of stock after stock splits and/or stock dividends (e.g., research, schedules, brokerage records)
The old-stock basis is allocated between the old and new stock
Q4.Recall the rule for this EA objective in Income And Assets: Options (e.g., stock, commodity, ISO, ESPP)
The option cost
Q5.Recall the rule for this EA objective in Income And Assets: Non-business bad debts
As a short-term capital loss
Q6.Recall the rule for this EA objective in Income And Assets: Investor versus trader
Profit from daily market movements rather than dividends, interest, or capital appreciation
Q7.How is the capital-asset holding period generally measured?
holding period begins the day after acquisition and ends on the day of disposition assets held more than one year are generally long-term assets held one year or less are generally short-term special tacking rules can apply to gifted or exchanged property
Q8.How are capital gains and losses generally netted?
separately net short-term gains and losses and long-term gains and losses then net the short-term and long-term results against each other individuals may deduct up to $3,000 of net capital loss against ordinary income each year, with the excess carried forward
Q9.What happens to a loss on a sale of property to a related party?
losses on sales or exchanges of property between related parties are generally disallowed later resale by the related buyer may allow the previously disallowed loss to offset gain under limited rules relationship definitions include certain family members and controlled entities
Q10.Simeon owns 100% of the stock in TOP Corporation. Gerald owns 100% of the stock in DAB Corporation. During the year, TOP Corporation sold used manufacturing equipment to DAB Corporation at a $52,000 loss. Simeon and Gerald are stepbrothers. Concerning the related party transaction loss rules, how should this transaction between Simeon and Gerald be handled?
The related party transaction rules do not apply in this scenario.
Q11.Caleb, who files as single, bought ten shares of Atomic Corporation stock on January 1, 2025. He sold all the shares for a $7,000 loss on December 31, 2025. He has no other capital gains or losses. He also earned $20,000 of wage income during the year. How must Caleb treat this transaction on his tax return?
He can deduct $3,000 as a short-term capital loss to offset his wage income on his return. The remaining amount, $4,000, must be carried over to future tax years.
Q12.What is the maximum number of years a taxpayer can carry over an unused capital loss?
Indefinitely.
Q13.Nikhil's adjusted basis in 500 shares of Medico Corporation was $2,550. He owned the shares for six months. If he sells all 500 shares for $3,300, what is the resulting gain or loss?
$750 short-term gain.
Q14.Two years ago, Sunil purchased 100 units of Ethereum, a cryptocurrency, for $9,000. On March 5, 2025, he exchanged all 100 units of Ethereum for 3.47826 units of Bitcoin, another cryptocurrency, worth $160,000 on the date of exchange. What gain, if any, must Sunil report in 2025?
$151,000 long-term capital gain
Q15.Roshan and Tatiana owned a vacation home for 14 months before selling it for $254,000. Their adjusted basis in the home was $232,000, and they incurred $12,500 of selling expenses. Prior to the sale, they did not rent the home. What is the nature and amount of their gain?
$9,500 long-term capital gain.
Q16.Tahir purchased 100 shares in Foresthill Mutual Fund on June 1, 2025, for $750. He also received a capital gain distribution of $120, but he did not sell his shares in the mutual fund during the year. The $120 was reported to him on Form 1099-DIV. How should this be reported on his tax return?
He must report the $120 as a long-term capital gain.
Q17.Rishi purchased his main home five years ago for $150,000. He sold it at a loss, for $115,000 in 2025. Which of the following statements is correct?
Rishi cannot claim a loss for the sale of his home.
Q18.Consuela is unmarried. She purchased 1,000 shares of Hometown Mutual Fund on February 15, 2019, for $15 per share. The fund does poorly, and on April 30, 2025, Consuela sold all her shares for $3.75 per share. She also earned $49,000 of wages in 2025. She has no other transactions during the year. How should the mutual fund sale be reported on her tax return?
She can deduct a $3,000 capital loss on her tax return, and the remainder of the losses will carry forward to subsequent years.
Q19.Colin purchased 100 shares of Entertainment Media, Inc. stock for $1,000 on November 3, 2025, He sold these shares for $750 on December 22, 2025. Colin has seller's remorse, and he regrets selling his shares. So, on January 9, 2026, (the following year), he repurchases 100 shares of Entertainment Media for $800. Which of the following statements is correct?
Colin cannot deduct his stock loss of $250 and must add the disallowed loss to his basis of the shares purchased on January 9, 2026.
Q20.Melissa purchased 1,000 shares of Sunshine Foods, Inc. stock five years ago at $10 per share. She sold 900 shares on January 15, 2025, at $9 per share, resulting in a $900 loss. Melissa's husband, Singh, purchased 900 shares of Sunshine Foods Inc. stock on February 10, 2025. Singh and Melissa keep their finances separate and will file separate tax returns. Which of the following statements is correct?
Melissa has a wash sale, and her loss is not deductible.
Q21.Noah bought two blocks of Acme Corporation stock. Each block was 400 shares. He purchased the first block on May 30, 2023, for $1,200 and the second block on June 8, 2025, for $1,600. On July 12, 2025, he needed money to fix his car, so he sold 400 shares for $1,500 but did not specify which block of stocks he sold. Noah's stock sale results in a:
Long-term gain of $300.
Ready to move on?
- ▸ Explain at least 80% of these 21 rules without opening the answer, twice on different days.
- ▸ Score 80% across 20 or more mapped questions over two sessions, not one memorized round.
- ▸ Complete a timed Part 1 mock and return to this unit if its concepts remain flagged or missed.
Use these checks to choose your next study action. They do not predict a PSI scaled score.