During 2019, Gorilla Corporation, a calendar year C corporation, has net shortterm capital gains of $15,000, net long-term capital losses of $105,000, and taxable income from other sources of $460,000. Prior years’ transactions included the following:
2015 net short-term capital gains ...........$40,000
2016 net long-term capital gains ..............18,000
2017 net short-term capital gains ............25,000
2018 net long-term capital gains ..............20,000
a. How are the capital gains and losses treated on Gorilla’s 2019 tax return?
b. Determine the amount of the 2019 capital loss that is carried back to each of the previous years.
c. Compute the amount of capital loss carryforward, if any, and indicate the years to which the loss may be carried.
d. If Gorilla is a sole proprietorship rather than a corporation, how would the owner report these transactions on her 2019 tax return?
e. Assume that Gorilla Corporation’s capital loss carryfoward in part (c) is $27,000 and that Gorilla will be able to use $11,000 of the carryover to offset capital gains in 2020 and the remaining $16,000 to offset capital gains in 2021. In present value terms, determine the tax savings of the $105,000 long-term capital loss recognized in 2019. Assume a discount rate of 5% (present value factors are in Appendix F). Further, assume that Gorilla Corporation’s marginal income tax rate is 34% for all tax years prior to 2018. Create a spreadsheet using Microsoft Excel (or a similar software program) that summarizes your analysis.