ExpertHard1 markMultiple Choice
CPA · Question 38 · Area V: Entity Taxation
A C Corporation had a net capital loss of $20,000 in Year 4. It had capital gains of $5,000 in Year 1, $8,000 in Year 2, and $0 in Year 3. What is the amount of capital loss carryforward to Year 5?
A C Corporation had a net capital loss of $20,000 in Year 4. It had capital gains of $5,000 in Year 1, $8,000 in Year 2, and $0 in Year 3. What is the amount of capital loss carryforward to Year 5?
Answer options:
A.
$20,000
B.
$7,000
C.
$0
D.
$15,000
How to approach this question
Corp Capital Loss Rule: Carry BACK 3 years, then FORWARD 5 years. Use it against Year 1, then Year 2. $20k - $5k - $8k = $7k left.
Full Answer
B.$7,000✓ Correct
Corporations must carry back capital losses 3 years and then forward 5 years. The $20,000 loss is applied first to Year 1 ($5,000) and Year 2 ($8,000). Total used = $13,000. Remaining carryforward = $20,000 - $13,000 = $7,000.
Common mistakes
Applying Individual rules (no carryback, indefinite carryforward) to a C Corp.
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