ExpertHard1 markMultiple Choice
CPA · Question 44 · Area V: Entity Taxation
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?
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:
A.
$10,000
B.
$4,000
C.
$0
D.
$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.
Practice the full CPA REG Practice Exam 4
72 questions · hints · full answers · grading
More questions from this exam
Q01A CPA is representing a client in an IRS examination. The client has requested that the CPA not p...HardQ02A tax return preparer is engaged to prepare a tax return for a client who has a significant deduc...HardQ03Regarding the burden of proof in a civil tax proceeding, which of the following statements is cor...HardQ04A taxpayer filed their Year 1 individual income tax return on April 1, Year 2. The return reporte...HardQ05Under the Ultramares doctrine regarding a CPA's liability for negligence to third parties, which ...Hard