Helena and Irwin Are Married Taxpayers Who File Jointly

Multiple Choice

Helena and Irwin are married taxpayers who file jointly. Their taxable income before considering capital gains and losses is $120,000. They have long-term capital gains of $8,000, short-term capital losses of $4,000, and short-term capital gains of $5,000. What are the tax effects of these events?
I.The short-term capital losses can offset only $3,000 of the short-term capital gains.
II.The net capital gains will add $1,420 to the couple's tax liability.
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A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.