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

In 2019, 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 2019. 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 2016 and 2017 and receive a tax refund. Assume the corporation’s marginal tax rate was 15 percent in 2016 and 39 percent in 2017. Which course of action do you recommend and why?

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2015 2016 2017 2018 $12,000 -0- $12,000 $ 6,000 19.000 $25.000 $150,000 4,000 $154,000 $600.000 Ordinary income Net capital gain -0- Taxable income $600,000