Billingsworth Corporation has the following net capital gains and losses for 2009 through 2012.Billingsworth' marginal tax rate is 34% for all years.
$$\begin{array} { l l l l }
\frac { 2009 } { \$ 8,000 } & \frac { 2010 } { \$ 3,000 } & \frac { 2011 } { \$ 6,500 } & \$ \frac { 2012 } { \$ ( 9,000 ) }
\end{array}$$
In 2013,Billingsworth Corporation earned net operating income of $30,000.What is/are the tax effect(s)of the $9,000 net capital loss in 2012?
I.Corporate taxable income is $21,000.
II.The net capital loss will provide income tax refunds totaling $3,060.

Question

Billingsworth Corporation has the following net capital gains and losses for 2009 through 2012.Billingsworth' marginal tax rate is 34% for all years.
$$\begin{array} { l l l l } 
\frac { 2009 } { \$ 8,000 } & \frac { 2010 } { \$ 3,000 } & \frac { 2011 } { \$ 6,500 } & \$ \frac { 2012 } { \$ ( 9,000 ) }
\end{array}$$
In 2013,Billingsworth Corporation earned net operating income of $30,000.What is/are the tax effect(s)of the $9,000 net capital loss in 2012?
I.Corporate taxable income is $21,000.
II.The net capital loss will provide income tax refunds totaling $3,060.

Quizplus · Accepted Answer

The $9,000 net capital loss in 2012 can be carried back to offset the net capital gains from 2009, 2010, and 2011, resulting in tax refunds. The corporate taxable income for 2013 remains $30,000, as capital losses cannot offset ordinary income.

Billingsworth Corporation Has the Following Net Capital Gains and Losses