Bass, a C corporation, has a net short-term capital gain of $20,000 and a net long-term...

Bass, a C corporation, has a net short-term capital gain of $20,000 and a net long-term capital loss of $90,000 during 2019. Bass also has taxable income from other sources of $1 million.
a. Assume there are no prior year capital transactions. How are the 2019 capital gains and losses treated on Bass’ 2019 tax return and is there any potential impact to other tax years?
b. If Bass were a proprietorship, how would Ellen, the owner, report these transactions on her 2019 and future tax returns if there is any impact

Solutions

Expert Solution

Here, LTCG and STCG will be Set off against each other which leads to Final loss of LTCG of Around 90000 $ -20000$ = 70000$ to be carrieed forward.

LTCG will never be set off agianst Other Income.

In Next year, If there is any LTCG/ STCG then LTCL of 70000$ shall be set off against those and thenif any balance still exist then same shall be further carrieed forward else. no need to carry forward.

Company will pay Tax on 1 Million Dollars Other income at the rate of Corporate tax.

For Brevity Long Term Capital Gain is written as LTCG and Short Term Capital Gain is written as STCG.

It will not has any impact or change in Treatment if the Status of the tax payer is Corporate / Proprietorship company both ahving same treatement of Income Tax.

However, The proprietor will pay approx Individual slab tax rate over the other income sources rather than corporate tax rate. else treatement for Cpaital Gain / loss will remain same.

ekkarill92 answered 1 year ago

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