Part I: During 2013, Gain Corporation has net short-term capital gains of $15,00

Question

Part I: During 2013, Gain Corporation has net short-term capital gains of $15,000, net long-term capital losses of $105,000, and taxable income from other sources of $460,000. Prior years’ transactions included the following: 2009 net short-term capital gains $40,000 2010 net long-term capital gains 18,000 2011 net short-term capital gains 25,000 2012 net long-term capital gains 20,000 1.How are the capital gains and losses treated on Gain’s 2013 tax return?

2.Determine the amount of the 2013 capital loss that is carried back to each of the previous years.

3.Compute the amount of capital loss carry forward, if any, and indicate the years to which the loss may be carried.

Part II: Review the following potential investments by Gain Corporation Corporate Investment Scenario 1 Scenario 2 Scenario 3 Income from operations $700,000 $800,000 $900,000 Expenses from operations ($600,000) ($850,000) ($910,000) Qualifying dividends $100,000 $100,000 $100,000

Calculate the dividends received deductions for each independent investment scenario assuming:

1.10% ownership of the investment

2.25% ownership of the investment

3.90% ownership of the investment

Explanation / Answer

Part-I

(1) Treatment of capital gains and losses for 2013

Long Term capital loss of $105000 cannot be set off against any income except long term caoital gain. Since there is no long Term capital gain in 2013 thus long term capital loss of $105000 will not be set off against any other income.

(2) Long term capital gain to be carried back to previous years are as follows

2012 = $105000

2011 = $85000

2010 = $85000

2009 = $67000

(3) Capita loss to becarried forward = $67000

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