Tatoo Incorporated reported a net capital loss of $14,800 in 2020. The company had a net capital gain of $6,100 in 2018 and $4,800 in 2017. In 2019, although the company suffered a net operating loss, it had net capital gains of $2,800. What is the amount of Tatoo's capital loss carryover to 2021 remaining after it applies the carryback?
A)$1,100.
B)$3,900.
C)$8,700.
D)$14,800.

Question

Quizplus · Accepted Answer

To calculate Tatoo's capital loss carryover to 2021, we need to start with its net capital gains and losses from prior years:

2017 net capital gain: $4,800
2018 net capital gain: $6,100
2019 net capital gain: $2,800

Total net capital gains: $13,700

We can use up to $13,700 of Tatoo's 2020 net capital loss to offset those gains. However, since the company had only $14,800 of net capital loss, we can apply only $13,700 of this loss to prior years. The remaining $1,100 is Tatoo's capital loss carryover to 2021:

2020 net capital loss: -$14,800
Net capital gains from prior years: $13,700
Amount of capital loss carryover to 2021: -$14,800 + $13,700 = -$1,100 (which is equal to $1,100 when expressed as a positive number)

Tatoo Incorporated Reported a Net Capital Loss of $14,800 in 2020