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An individual had employment income in 20X7 of $50,000. He had had loss carry forward amounts...

An individual had employment income in 20X7 of $50,000. He had had loss carry forward amounts of net capital losses ($20,000), non-capital losses ($22,000), and farm losses ($24,000). What maximum amount of losses carry forward would he claim in 20X7?

A) $50,000

B)$46,000

C) $66,000

D)$20,000

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Answer #1

Answer : - B. $46,000.

The net capital losses that he can claim is $3,000. As $3,000 is the limit till which net capital losses can be claimed. Remaining balance should be carry forward to next year.

The non capital losses can be fully claimed if its equal to or less than the income. The $22,000 loss can be claimed.

The farm losses are fully claimed if the tax payer is a full time farmer or the primary source of income is farming. In above case the taxpayer is the not a full time farmer so only a portion of loss will be claimed and the rest balance will be carry forward to next year. The amount of $21,000 is limit till which he can claim farm losses.

The total of losses he can claim = $3,000 + $22,000 + $21,000 = $46,000.

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