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Part $1$

Amy has$$ long$-$term capital gains$($LTCGs$)$ taxed at different tax$$ rates, $15\%,25\%$ and$28\%.$ She also has net$$ short$-$term capital losses$($NSTCLs$)$ that amount to less than her net$$ long$-$term capital gain$($NLTCG$).$ The procedure for offsetting the NSTCL against the LTCGs is favorable to her. Explain.

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Part $1$

A$.$

The NSTCL is offset against the LTCG that is taxed at$15\%$ or$20\%$ first. Any NSTCL remaining can be carried forward to be offset against LTCG that is taxed at$15\%$ or$20\%$ in a following$$ year, up to twenty years. The NSTCL is used to remove a portion of the captial gains tax that must be paid.

B$.$

The NSTCL is first offset against LTCG that is taxed at$15\%$ or$20\%,$ the lowest rate for$$ LTCG$,$ then against LTCG taxed at$25\%,$ and finally against the LTCG taxed at the highest rate of$28\%.$ The NSTCL is used first to reduce gains taxed at the lower rates.

C$.$

The NSTCL is first offset against LTCG that is taxed at$28\%,$ the highest rate for$$ LTCG$,$ then against LTCG taxed at$25\%,$ and finally against the LTCG that is adjusted net capital gain$($ANCG$)$ taxed at$15\%$ or$20\%.$ The NSTCL is used first to reduce gains taxed at the higher rates.

D$.$

The NSTCL is offset against the LTCG that is taxed at$28\%.$ Any NSTCL remaining can be carried forward to be offset against LTCG that is taxed at$28\%$ in a following$$ year, up to twenty years. The NSTCL is used to reduce gains that are taxed at$28\%.$