In 2018, Kirk invested $50,000 in a general partnership in which he materially participates (passive activity loss limits do not apply). The business incurs a first-year loss in 2018, and Kirk’s share of the business’ deductible loss was $27,000. What amount of the $27,000 loss is allowed under the at-risk rules in 2018? Enter the allowed loss amount as a positive number.

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A:

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.