Dallas Corporation, not a dealer in securities, realizes taxable income of $60,000 from the operation of its business. Additionally, in the same year, Dallas realizes a long-term capital loss of $10,000 from the sale of marketable securities. If the corporation realizes no other capital gains or losses, what is the proper treatment for the $10,000 long-term capital loss on the tax return?
A)Use $3,000 of the loss to reduce taxable income and carry $7,000 of the long-term capital loss forward for five years.
B)Use $6,000 of the loss to reduce taxable income and carry $4,000 of the long-term capital loss forward for five years.
C)Use $10,000 of the long-term capital loss to reduce taxable income.
D)Carry the $10,000 long-term capital loss back three years as a short-term capital loss, then forward five years.

Question

Quizplus · Accepted Answer

Corporations cannot deduct capital losses against ordinary income. Instead, they can carry back capital losses three years and forward five years to offset capital gains in those years.

Dallas Corporation, Not a Dealer in Securities, Realizes Taxable Income