In 2014, Bluebird Corporation had net income from operations of $100,000. Further, Bluebird recognized a long- term capital gain of $30,000, and a short-term capital loss of $45,000. Which of the following statements is correct?
A) Bluebird Corporation will have taxable income in 2014 of $100,000 and will have a net capital loss of $15,000 that can be carried back 3 years and forward 5 years.
B) 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 short-term capital loss.
C) Bluebird Corporation may deduct $33,000 of the capital loss in 2014 and may carry forward the remainder of the capital loss indefinitely to offset capital gains.
D) Bluebird Corporation will have taxable income in 2014 of $85,000.
E) None of the above.

Question

Quizplus · Accepted Answer

Long-term capital gains are taxed at a lower rate than ordinary income, while short-term capital losses are deductible against ordinary income. Bluebird Corporation's net capital loss is $15,000 ($30,000 - $45,000). This loss can be carried back 3 years and forward 5 years to offset capital gains.

In 2014, Bluebird Corporation Had Net Income from Operations of $100,000