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Treatment of Capital Losses By Corporations Vs Individuals

1. A company has income of $62,000 from operations and a net long-term capital loss of $5,000. What is the corporation's taxable income for the year?

2. What are the differences in the treatment of capital losses of corporations and of individuals?

Solution Preview

1. IRC 1211(a) states that "In the case of a corporation, losses from sales or exchanges of capital assets shall be allowed only to the extent of gains from such sales or exchanges. " IRC Section 1212(a) provides that "If a corporation has a net capital loss for any taxable year (hereinafter in this paragraph referred to as the "loss year"), the amount thereof shall be ... a capital loss carryback to each of the 3 taxable years preceding the loss year, but only to the extent ... [that] such loss is not attributable to a foreign expropriation capital loss, and ... the carryback of such loss does not increase or produce a net operating loss (as defined in section 172 (c)) for the taxable year to which it is being carried back; ... and shall be treated as a short-term capital ...

Solution Summary

This solution discusses and cites the Internal Revenue Code provisions dealing with the difference in the deductibility of capital losses by corporations and individuals.