Question

True or False

3.    An individual's current year capital loss from investment property not offset against capital gains and ordinary income is carried forward indefinitely.

4.    Individuals may deduct capital losses only to the extent of their capital gains.

6.    Real property such as a commercial building depreciated using MACRS is not subject to depreciation recapture.

7.    Land held for six months is sold for a gain. The land is used in the taxpayer's business. The gain is treated as ordinary income.

11. Which of the following properties is not a capital asset?

a. Taxpayer's personal residence

b. Computer used in taxpayer's business

c. Corporate stocks owned by an investor

d. Business suits worn by taxpayer

e. All of the above are capital assets

Answer 1

3. True. Individual's capital loss can be carried forward indefinitely to a maximum of $3,000 each year.

4. True. To a maximum of $3,000 in one year, not more than $3,000. If the un adjusted capital loss in current year is $20,000, a maximum of $3000 could be adjusted in the following year, and then in the next year again to a maximum of $3,000 to indefinitely.

6. False. When you dispose off property that is depreciated using MACRS, any gain on the disposition is recaptured as ordinary income upto the amount of depreciation previously allowed.

7. True. If a land is sold for a gain within six months, or say within one financial year, it is termed as ordinary business income.