ExpertHard1 markMultiple Choice
CPA · Question 41 · Area V: Entity Taxation
A C Corporation had a net capital loss of $10,000 in Year 4. It had reported net capital gains of $2,000 in Year 1, $3,000 in Year 2, and $1,000 in Year 3. What is the amount of capital loss carryforward to Year 5?
A C Corporation had a net capital loss of $10,000 in Year 4. It had reported net capital gains of $2,000 in Year 1, $3,000 in Year 2, and $1,000 in Year 3. What is the amount of capital loss carryforward to Year 5?
Answer options:
A.
$10,000
B.
$4,000
C.
$0
D.
$5,000
How to approach this question
Apply C Corp Capital Loss rules: Back 3, Forward 5. Must carry back first.
Full Answer
B.$4,000✓ Correct
B
C Corporations carry net capital losses back 3 years and forward 5 years. The loss must be applied to the earliest year first. Loss: $10,000. Apply to Year 1: -$2,000. Apply to Year 2: -$3,000. Apply to Year 3: -$1,000. Total used: $6,000. Remaining Carryforward to Year 5: $10,000 - $6,000 = $4,000.
Common mistakes
Forgetting the mandatory 3-year carryback for corporations.
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