Tatoo Inc.reported a net capital loss of $13,000 in 2017.It had a net capital gain of $4,300 in 2015 and $3,000 in 2014.In 2016,although the company suffered a net operating loss,it had net capital gains of $1,000.What is the amount of Tatoo's capital loss carryover remaining after it applies the carryback?
A) $4,700.
B) $5,700.
C) $8,700.
D) $13,000.

Question

Quizplus · Accepted Answer

When there is a net capital loss, it can be applied as a deduction against capital gains in previous years. If there were no capital gains in previous years, the loss can be carried forward to future years.
In this case, Tatoo can carry the $13,000 capital loss back to 2015 and 2014, where it had net capital gains. This will reduce its tax liability for those years.
2015: $4,300 - $13,000 = ($8,700) loss carryover
2014: $3,000 - $8,700 = ($5,700) loss carryover
For 2016, Tatoo cannot carry the loss back because it had a net operating loss that year. So, the entire $13,000 loss carries forward to 2018.
Therefore, the remaining capital loss carryover after applying the carryback is $5,700 ($8,700 + $0 - $3,000).

Tatoo IncReported a Net Capital Loss of $13,000 in 2017