In 2010,Bluebird Corporation had net income from operations of $50,000.Further,Bluebird recognized a long-term capital loss of $20,000,and a short-term capital gain of $5,000.Which of the following statements is correct?
A)Bluebird 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 long-term capital loss.
B)Bluebird Corporation will have taxable income in 2010 of $50,000 and will have a net capital loss of $15,000 that can be carried back 3 years and forward 5 years.
C)Bluebird Corporation will have taxable income in 2010 of $47,000.
D)Bluebird Corporation may deduct $8,000 of the capital loss in 2010 and may carry forward the remainder of the capital loss indefinitely to offset capital gains.
E)None of the above.

Question

Quizplus · Accepted Answer

Corporations can offset capital gains with capital losses. The $20,000 long-term capital loss offsets the $5,000 short-term capital gain, resulting in a net capital loss of $15,000. This net capital loss can be carried back 3 years and forward 5 years. The taxable income from operations remains $50,000.

In 2010,Bluebird Corporation Had Net Income from Operations of $50,000