Question

Carrot Corporation, a C corporation, has a net short-term capital gain of $65,000 and a net long-term capital loss of $250,000 during 2017. Carrot Corporation had taxable income from other sources of $720,000. Prior years’ transactions included the following:________.
Net long-term capital gain $150,000
Net short-term capital gain 60,000
Net short-term capital gain 45,000
Net long-term capital gain 35,000
Compute the amount of Carrot’s capital loss carryover to 2018.

Answer 1

Answer:

$45,000

Explanation:

For computation of Carrot’s capital loss carryover to 2018 first we need to figure out some steps which is shown below:-

Step 1

Net Capital Loss = Net Short Term Capital Gain -2017 - Net Long Term Capital Loss -2017

= $65,000 - $250,000

= -$185,000

Here, Net Capital Loss amount $185,000 which is not deductible in year 2017, but can be carried back to the three preceding years i.e. 2014, 2015 and 2016

Step 2

Net Capital Loss is set off in preceding years = Net Short Term Capital Gain - 2014 + Net Short Term Capital Gain  2015 + Net Short Term Capital Gain - 2016

= $60,000 + $45,000 + $35,000

= $140,000

and finally

Amount of loss Carryover to 2018 = Net Capital Loss - Net Capital Loss is set off in preceding years

= $185,000 - $140,000

= $45,000