In 2014, Paradise Corporation had net income from operations of $75,000. Further

Question

In 2014, Paradise Corporation had net income from operations of $75,000. Further, Paradise recognized a long-term capital loss of $30,000, and a short-term capital gain of $45,000. Which of the following statements is correct? Select one:

a. Paradise Corporation may deduct $33,000 of the capital loss in 2014 and may carry forward the remainder of the capital loss indefinitely to offset capital gains.

b. Paradise Corporation may use the capital loss to offset the capital gain and must carry the net capital loss of $15,000 forward five years as a short-term capital loss.

c. Paradise Corporation will have taxable income in 2014 of $100,000 and will have a net capital loss of $15,000 that can be carried back 3 years and forward 5 years.

d. Paradise Corporation will have taxable income in 2014 of $85,000.

Explanation / Answer

b. Paradise Corporation may use the capital loss to offset the capital gain and must carry the net capital loss of $15,000 forward five years as a short-term capital loss.

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