For its first four years of operation, Corporation Y reported the following taxable income:

In 2015, Corporation Y generated $900,000 ordinary income and recognized a $20,000 loss on the sale of a capital asset. It is considering selling a second capital asset before the close of 2015. This sale would generate a $21,000 capital gain that would allow the corporation to deduct its entire capital loss. Alternatively, it could carry its $20,000 net capital loss back to 2012 and 2013 and receive a tax refund. Which course of action do you recommend and why?

Transcribed Image Text:

2011 2013 $150,000 600,000 $154,000 2012 2014 $12,000 6,000 Ordinary income Net capital gain Taxable income $12,000 $25.000