Question

1. Bear Corporation has net short-term capital gains of $45,000 and net long-term capital losses of $285,000 during 2019. Bear Corporation had taxable income from other sources (not capital gains or losses) of $700,000. Prior years' transactions included the following (in each of these prior years taxable income was in excess of $1 million): 2015 2016 2017 2018 Net short-term capital gains Net long-term capital gains Net short-term capital gains Net long-term capital gains $150,000 $60,000 $45,000 $105,000 The amount of Bears capital loss carryover to 2020 is: a. $0 b. $30,000 c. $210,000 d. $140,000 e. None of the above

Answer 1

Net short term capital gains	$            45,000
Net long term capital losses 2019	$       (285,000)
Net capital loss	$       (240,000)

The net capital loss of $ 240,000 cannot be deducted in 2019 return alone. As per IRS provisions for corporation, capital losses are allowed in 2019 only to extent of capital gains. A net capital loss is to be carried back 3 years and forward up to 5 years as short term capital loss.

For current case, 3 years of capital gains of 2016, 2017 and 2018 needs to be adjusted.

Total carrybacks from 3 years = 60,000 + 45,000 + 105,000 = $ 210,000

Net capital loss of 240,000 is to be offset against this carryback of $ 210,000.

Hence, the amount of carryovers to 2020 would be = 240,000 -210,000 = $ 30,000

The correct option is b. $ 30,000.