Question

Zeno Inc. sold two capital assets in 2019. The first sale resulted in a $53,000 capital loss, and the second sale resulted in a $25,600 capital gain. Zeno was incorporated in 2015, and its tax records provide the following information:

	2015		2016		2017		2018
Ordinary income	$443,000		$509,700		$810,300		$921,000
Net capital gain	22,000		0		4,120		13,600
Taxable income	$465,000		$509,700		$814,420		$934,600

1. Compute Zeno’s tax refund from the carryback of its 2019 nondeductible capital loss. Assume Zeno's marginal tax rate was 34 percent in 2015 through 2017, and 21 percent in 2018.
2. Compute Zeno’s capital loss carryforward into 2020.

Answer 1

The capital loss carry back for preceding 3 pevious year and carry over 5 succeding year

Carry back of losses will be from 2015-2017

Capital gain $25600

Capital loss $53000

Net capital loss (27400)

	2016	2017	2018	total losses carry back
Net capital gain	0	4120	13600
Carry back capital losses		4120	13600	17720

a) Computation of Zeno tax refund as 34%

34% tax refund of $ 17,720

= 6024.8

Rouded off = 6025

b)Computation zeno’s capital loss carryforward into 2020.

=(53000 - 25600) - 17720

Capital loss carry forward = 27400 - 17720

= $9,680