Question

I know that capital losses may be carried backwards 3 years and forward 5 years but how come in this problem we have a loss of 10,000 we do don't take it out of income before applying taxes? what if in this problem we had a capital gain and a loss? would you subtract the loss from the gain and include that number in the tax liability calculation? please explain

Question 2 0/1 pts Last year, your company had sales of $3.6 million, cost of goods sold of $2.3 million and operating expenses amounting to $840,000. The firm had $114,000 in depreciation expense. In addition, the firm paid 8% interest on $625,000 in bonds, received $30,000 in dividend income, and sold property for a $10,000 capital loss. What was the firm's tax payment? $62,160 $65,310 $63,210 $68,460 $59,010

Answer 1

Please note that capital losses are allowed to be set off only against income from capital gains. These cannot be set off against any other income.

Further short term capital loss can be set off against long term capital gain as well as short term capital gain. Whereas long term capital losses can be set off only against long term capital gain.

Now coming to your question if there would have been any short term capital loss and simultaneously any short term or long term capital gain then we would have reduced that loss from gain and would have included the Balance amount in the income tax return. And if there would have been any long term capital Loss as well as any long term capital gain then again we would have reduced that loss from gain and have shown only balance gain in return .