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Treatment of Capital Losses By Corporations Vs Individuals

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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?

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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.

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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 ...

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