Business, 04.06.2021 01:00 TaraC

Goose Corporation, a C corporation, incurs a net capital loss of $12,000 for 2020. It also has ordinary income of $10,000 in 2020. Goose had net capital gains of $2,500 in 2016 and $5,000 in 2019. a. Determine the amount, if any, of the net capital loss of $12,000 that is deductible in 2020.
b. Determine the amount, if any, of the net capital loss of $12,000 that is carried forward to 2017.

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Answer from: rama64

a. The amount of the net capital loss of $12,000 that is deductible in 2020 is zero.

b. The amount of the net capital loss of $12,000 that is carried forward to 2021 is $7,000.

Explanation:

Sections 1211 and 1212 of the Internal Revenue Code (IRC) address capital losses of corporations and declare that:

Corporation capital losses are not allowed to be deducted from ordinary income.For that year, corporations can only deduct capital losses up to the amount of capital profits from other assets.Any capital losses that haven't been deducted because there aren't any more capital gains can be carried back three years and forward five years.

As a result of the foregoing, we have:

a. Determine the amount, if any, of the net capital loss of $12,000 that is deductible in 2020.

Because there are no capital gains in 2020, no portion of the $12,000 net capital loss is deductible in 2020. It cannot be deducted from ordinary income in 2020.

Therefore, the amount of the net capital loss of $12,000 that is deductible in 2020 is zero.

b. Determine the amount, if any, of the net capital loss of $12,000 that is carried forward to 2017.

Note: This question b is not correct because the 2017 is used instead of 2021 as the year. It therefore correctly stated before answering the question as follows:

Determine the amount, if any, of the net capital loss of $12,000 that is carried forward to 2021.

The explanation of the answer is now given as follows:

Because businesses can carry back three years and forward five years, the amount to carry forward to 2021 will be the difference of $12,000 in capital losses for 2020 and $5,000 in capital gains for 2019, which is $7,000 (i.e. $12,000 - $5,000 = $7,000).

Therefore, the amount of the net capital loss of $12,000 that is carried forward to 2021 is $7,000.

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Goose Corporation, a C corporation, incurs a net capital loss of $12,000 for 2020. It also has ordin...