Higgins Corporation realized the following capital gains and losses during 20X6:

Question

Higgins Corporation realized the following capital gains and losses during 20X6:
Short-term capital gain from the sale of land held for investment - $10,000
Short-term capital loss from the sale of common stock - (18,000)
Long-term capital gain from the sale of corporate bonds - 6,000
Long-term capital loss from the sale of common stock - (4,000)

Determine the effects of these transactions. Assume that Higgins Corporation had a net long-term capital gain of $1,000 in 20X3, a net long-term capital gain of $1,500 in 20X4, and a net short-term capital gain of $2,500 in 20X5.

Explanation / Answer

Year Year 2016 2016 Short term capital loss ($18,000) Adjusting with short term capital gain $10,000 Total Short term capital loss ($8,000) Long term capital gain $6,000 Adjusting with long term capital loss ($4,000) Total long term capital gain $2,000 Net capital loss ($6,000) Higgins corporation has to carry back this net capital loss to last three preceding years: Net capital loss ($6,000) Adjusting with 2013 gains $1,000 Remaining capital loss: ($5,000) Adjusting with 2014 gains $1,500 Remaining capital loss: ($3,500) Adjusting with 2015 gains $2,500 Remaining capital loss: ($1,000) Higgins corporation can adjust this remaining net capital loss with capital gains of next five succeeding tax years. Thank you.... Year Year 2016 2016 Short term capital loss ($18,000) Adjusting with short term capital gain $10,000 Total Short term capital loss ($8,000) Long term capital gain $6,000 Adjusting with long term capital loss ($4,000) Total long term capital gain $2,000 Net capital loss ($6,000)

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