A C Corporation has a net capital loss of $10,000 in Year 4. It reported the following net capital gains in prior years: Year 1: $2,000; Year 2: $3,000; Year 3: $1,000. What is the amount of capital loss carryforward to Year 5?

Answer options:

$10,000

$4,000

$7,000

How to approach this question

Corp Capital Loss Rule: Carry BACK 3 years, then FORWARD 5 years. Apply to earliest year first.

Full Answer

B.$4,000✓ Correct

C Corporations must carry back capital losses 3 years and then forward 5 years. Loss $10,000. Applied to Year 1 ($2,000), Year 2 ($3,000), Year 3 ($1,000). Total used = $6,000. Remaining carryforward = $4,000.

Common mistakes

Forgetting the mandatory carryback.

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