Virginia owns 100% of Goshawk Company. In the current year, Goshawk Company sell

Question

Virginia owns 100% of Goshawk Company. In the current year, Goshawk Company sells a capital asset (held for three years) at a loss of $40,000. In addition, Goshawk has a short-term capital gain of $18,000 and net operating income of $90,000 during the year. Virginia has no recognized capital gain (or loss) before considering her ownership in Goshawk.

Complete each lettered item below, outlining how much of the capital loss may be deducted for the year and how much is carried back or forward.

a. If Goshawk is a proprietorship, only $ _________ long-term capital loss can be deducted in the current year. The remaining $ ___________net capital loss is carried ___________ and then ____________Correct 3 of Item 1.

b. If Goshawk is a C corporation, only $ __________long-term capital loss can be deducted in the current year. The remaining $ ___________ net capital loss is carried ______________ and then _____________ of Item 2.

Explanation / Answer

a. If Goshawk is a proprietorship, only $21000 long-term capital loss can be deducted in the current year. The remaining $19000 net capital loss is carried forward and then carried back Correct 3 of Item 1.

b. If Goshawk is a C corporation, only $ 18000 long-term capital loss can be deducted in the current year. The remaining $ 22000 net capital loss is carried back and then forward of Item 2.

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