ExpertMedium1 markMultiple Choice
CPA · Question 61 · Area II: Entity Tax Compliance
A C Corporation has a net capital loss of $20,000 in Year 4. In Years 1, 2, and 3, it had capital gains of $5,000, $8,000, and $2,000 respectively. What is the carryback/carryforward?
A C Corporation has a net capital loss of $20,000 in Year 4. In Years 1, 2, and 3, it had capital gains of $5,000, $8,000, and $2,000 respectively. What is the carryback/carryforward?
Answer options:
A.
Carryforward $20,000
B.
Carryback $5,000; Carryforward $15,000
C.
Carryback $15,000; Carryforward $5,000
D.
Deduct $3,000 current year; Carryback remainder.
How to approach this question
Corp Capital Loss Rule: Carry back 3 years, then forward 5 years. Sum gains from Y1-Y3 ($15k). Use loss there. Remainder ($5k) forward.
Full Answer
C.Carryback $15,000; Carryforward $5,000✓ Correct
IRC §1212. Capital losses are carried back 3 years to offset capital gains ($5k+$8k+$2k = $15k). The remaining $5,000 is carried forward for 5 years.
Common mistakes
Forgetting carryback; deducting $3,000 (individual rule).
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