Question

For its current tax year, Ilex Corporation has ordinary income of $260,000, a short-term capital loss...

For its current tax year, Ilex Corporation has ordinary income of $260,000, a short-term capital loss of $60,000, and a long-term capital gain of $20,000.

Calculate Ilex Corporation's tax liability for the current year.

Business   Accounting   
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Answer #1

Here, in the same year maximum amount of short term capital loss of $ 20,000 can be adjusted with same amount of long term capital gains and balance of short term un adjusted capital loss  [ $ 60,000 - $20,000] i.e $ 40,000 will be carried forward for the next assessment year.

Current corporation tax rate is 21%

So the tax liability of llex corporation = $ 260,000 X 21% = $ 54,600 ( during tax liability calculation short term un adjusted capital loss can't be deducted,it will be carried forward  )

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