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Assume taxable income is the starting point for computing E & P. During 2010, Sagittarius Corporation...

Assume taxable income is the starting point for computing E & P. During 2010, Sagittarius Corporation had a capital loss of $60,000 and a capital gain of $30,000. The net capital loss of $30,000 could not be deducted in arriving at Sagittarius's taxable income for 2010. The $30,000 was carried over to 2011 and fully deducted in that year.

The excess capital loss has no effect on Sagittarius Corporation's E&P in 2011.

The excess capital loss reduces Sagittarius Corporation's E & P for 2011.

The excess capital loss of $30,000 would reduce Sagittarius Corporation's E & P in 2010.

The excess capital loss increases Sagittarius Corporation's E & P for 2010.

None of the above.

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Answer #1

The excess capital loss reduces Sagittarius Corporation's E & P for 2011.

In 2011, capital loss carried over and fully deducted in that year from taxable income. Taxable income is starting point for computing E&P.

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