Please ask your question here:
Am I correct in saying that to solve this problem, we do nothing more than add the total of all the capital gains from all 3 years (5,000, 1,000 and 3,000) and subtract that from the net capital loss of 10,000, for a total of $1,000 (answer D)? And all the other information is not necessary to solve the problem? Thanks for your time!
Original Fast Forward Academy test bank question:
In 2011, Capital Corporation reports gross profits of $150,000, deductible expenses of $28,000, and a net capital loss of $10,000. Capital reported the following net capital gains during 2008-2010:
Year : Net Capital Gains
2008 : $5,000
2009 : $1,000
2010 : $3,000
What is the amount of Capital's capital loss carryover to 2012?
A corporation can deduct capital losses only up to the amount of its capital gains. In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years.
A capital loss is carried to other years in the following order.
3 years prior to the loss year.
2 years prior to the loss year.
1 year prior to the loss year.
Any loss remaining is carried forward for 5 years.
When you carry a net capital loss to another tax year, it is treated as a short-term loss. It does not retain its original identity as long term or short term.
FFA EA Book Reference: CH 13 Corporations Subsection: Business income Subject: Net income, net operating losses, and loss limitations including passive activity and at risk limitations Correct Answer: D
To the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
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