Lee sold shares at a $2,000 loss on December 10, 2025, and bought substantially identical shares on December 28, 2025. What happens to the loss?

It is disallowed and added to the basis of the new shares

It is deductible in 2025 because the purchase occurred after the sale

It is deductible only if the new shares are held more than one year

Beth owned and lived in her home for only 12 months before selling it at a $90,000 gain because her employer transferred her 200 miles away. She is single. How much gain can she exclude?

$90,000, because her reduced maximum exclusion is $125,000

$0, because she did not meet the two-year ownership and use tests

How is gain on the sale of a home attributable to depreciation claimed after May 6, 1997 (for a home office) treated?

It cannot be excluded under section 121 and is taxed as unrecaptured section 1250 gain up to 25%

It reduces the $250,000 exclusion dollar for dollar but is not itself taxed as part of the gain on the sale

It is taxed as ordinary income at the taxpayer's top rate

How does a net capital loss carryover retain its character?

It keeps its short-term or long-term character and carries forward indefinitely for individuals

It carries back three years and forward five years

It becomes long-term regardless of origin

It is converted to ordinary loss in the following year

Capital gains, losses and home sales

Net long-term capital gain is taxed at 0%, 15% or 20% (for 2025, 0% up to $48,350 of taxable income single / $96,700 joint), collectibles at up to 28% and unrecaptured section 1250 gain at up to 25%; net capital losses offset $3,000 of ordinary income a year and carry forward indefinitely.

Updated 2026-09-23 · 5 sources · By the EnrolledAgentKit team

Exam part

Part 1

Individuals

IRS domain

Income and Assets

17 of 85 scored Qs

Tax year tested

2025

2026-27 SEE

Practice questions

10 free below

The rules the exam tests

Figures for tax year 2025, the year the 2026-27 SEE tests. Verify against the cited primary source.
Rule	What it says (2025)	Source
Holding period	More than 1 year = long-term	IRC 1222
0% / 15% / 20% breakpoints (2025)	Single $48,350 / $533,400; MFJ $96,700 / $600,050; HOH $64,750 / $566,700	Rev. Proc. 2024-40
Special rates	Collectibles 28%; unrecaptured 1250 gain 25%	IRC 1(h)
Loss limit	$3,000 ($1,500 MFS); indefinite carryforward keeps character	IRC 1211(b), 1212(b)
Wash sale	Repurchase within 30 days before/after: loss disallowed, added to basis	IRC 1091
Home sale exclusion	$250,000 / $500,000; own and use 2 of 5 years; partial for job, health, unforeseen	IRC 121
Home depreciation after May 6, 1997	Not excludable; taxed as unrecaptured 1250 gain	IRC 121(d)(6)
Virtual currency	Property; capital gain or loss if a capital asset	Notice 2014-21

Worked example

Facts: Ray (single) has $30,000 of ordinary taxable income and a $30,000 long-term gain in 2025, total taxable income $60,000.

Stacking: Ordinary income fills the first $30,000. The 0% band runs to $48,350, so $18,350 of the gain is taxed at 0% and the remaining $11,650 at 15% ($1,747.50).

Exam traps

Capital gains stack on top of ordinary income for rate purposes.
Section 121 requires 24 months of ownership and 24 months of use in 5 years, not necessarily concurrent.
Personal-use property losses are not deductible.
Corporations follow different loss rules (carryback 3, forward 5).