Cedar Corporation incurs a net capital loss of $20,000 in 20X3 that is carried forward to 20X4. However, Cedar will deduct the net capital loss in the computation of current E&P for 20X3.

Question

Quizplus · Accepted Answer

According to the regulations, net capital losses can be carried forward to future years to offset future capital gains, but they cannot be deducted in the computation of current E&P. However, if there is a capital loss from a prior year that is carried forward, it can be deducted in the computation of current E&P. Therefore, Cedar Corporation can deduct the net capital loss of $20,000 in the computation of current E&P for 20X3.

Cedar Corporation Incurs a Net Capital Loss of $20,000 in 20X3