LO 3,8 Citron, a calendar year taxpayer, began business in January 2017. It had a long-term capital gain of $5,000 in 2017 and a long-term capital loss of $10,000 in 2018. For both years, Citron had an operating profit in excess of $100,000.  How are these capital gain and loss transactions handled for income tax purposes if Citron is: An individual?A C Corporation?An S Corporation?

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Asked Aug 14, 2019
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  1. LO 3,8 Citron, a calendar year taxpayer, began business in January 2017. It had a long-term capital gain of $5,000 in 2017 and a long-term capital loss of $10,000 in 2018. For both years, Citron had an operating profit in excess of $100,000.  How are these capital gain and loss transactions handled for income tax purposes if Citron is:

 

  1. An individual?
  2. A C Corporation?
  3. An S Corporation?

 

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Step 1
  1. Provision of long-term capital gain as an individual.

 

Long-term capital gain of $5,000 in 2017 is taxable in 2017 as a long-term capital gain @15%

 

And long-term capital loss of $10,000 in 2018 is either set off to the capital gain or capital loss up to $3,000 can be set off from normal income above this limit can be carry forward for next year.

 

Three maximum federal income tax rates apply to most types of net long-term capital gains income in tax year 2018.

  

  1. 0 percent for taxpayers in the 10 percent or 15 percent bracket for ordinary income (under $77,400 for married joint filers)
  2. 15 percent for taxpayers above the 15 percent bracket but below the 39.6 percent bracket (from $77,400 to $480,050 for married joint filers)
  3. 20 percent for taxpayers in the top 39.6 percent bracket ($480,050 or higher for married joint filers)
Step 2

2. Provision of long-term capital gain as an C corporation.

C corporation deducts capital loss up to their capital gain.

If in any tax year capital loss exceed capital gain th...

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