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

Ostrich, 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. Ostrich has $425,000 in taxable income from other sources. Prior years’ transactions included the following:

2014 net short-term capital gains $10,000

2015 net long-term capital gains 18,000

2016 net long-term capital gains 15,000

2017 net short-term capital gains 25,000

2018 net long-term capital gains 5,000

Required: a. How are the capital gains and losses treated on Ostrich’s 2019 tax return? b. Determine the amount of capital loss, if any, to be carried forward. Indicate the nature of the capital loss carried forward and the years to which the loss would be carried forward.

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Expert Solution

Answer :

(a).

Short term capital gain	$20,000
Long term capital loss	$90,000
Net capital loss	$70,000

Out of net capital loss of $70,000, $3,000 can be used to set off the other income of $425,000 and the rest of the loss of $67,000 is to be carried forward to the future years.

(b). The amount of carry forward of capital is $67,000 out of which $3,000 can be set off from other income every year in the future periods. However, if there is a gain in any of the future years, then such gain can be set off from such capital loss

For Example : Let's assume there is a capital gain in the next year of $75,000, then whole $67,000 can be set off against such capital gain in the next year itself

Now let's assume there is a capital gain of $75,000 in 2021 and there are no gains in 2020. Now, ostrich can set off $3,000 of capital loss in 2020 against other income. And in 2021, ostrich can set off $64,000 against the capital gain of $75,000

ekkarill92 answered 10 months ago

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