Damon, Inc. began operations in 2013. It had the following gains and losses each
ID: 2426524 • Letter: D
Question
Damon, Inc. began operations in 2013. It had the following gains and losses each year:
2013
2014
2015
Long-term capital gain
$ 50,000
$ 10,000
$ 3,000
Short-term capital gain
--0--
46,000
1,000
Long-term capital loss
(10,000)
(17,000)
(19,000)
Short-term capital loss
(14,000)
(5,000)
(20,000)
Section 1231 gain
4,000
--0--
2,000
Taxable income prior to above gains and losses
340,000
400,000
100,000
Compute Damon's taxable income for each year and identify its capital asset positions. Also, determine if it is entitled to a refund.
2013
2014
2015
Long-term capital gain
$ 50,000
$ 10,000
$ 3,000
Short-term capital gain
--0--
46,000
1,000
Long-term capital loss
(10,000)
(17,000)
(19,000)
Short-term capital loss
(14,000)
(5,000)
(20,000)
Section 1231 gain
4,000
--0--
2,000
Taxable income prior to above gains and losses
340,000
400,000
100,000
Explanation / Answer
Damon, Inc. is entitled to a refund. It carries back the $33,000 loss in 2015 to 2013 (the company was not in existence prior to 2013) and offsets the $30,000 gain. The remaining $3,000 loss ($33,000 - $30,000)is carried to 2014 and offsets part of the $34,000 gain. The refund is equal to
$11,220 (($30,000 x 0.34) + ($3,000 x 0.34)).
2013 2014 2015 NET LONG TERM CAPITAL GAIN / (LOSS) 44000 (7000) (14000) NET SHORT TERM CAPITAL GAIN / (LOSS) (14000) 41000 (19000) NET CAPITAL GAIN 30000 NET CAPITAL GAIN 34000 NET CAPITAL LOSS (WHEN CARRIED BECOMES SHORT TERM) (33000) TAXABLE INCOME BEFORE 340000 400000 100000 TAXABLE INCOME AFTER 370000 434000 100000Related Questions
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