Question

Compare the tax treatment of capital gains and losses by a corporation and by an individual.

A. Corporations and individuals compute capital gains and losses the same way.​ However, corporations cannot deduct capital losses from ordinary​ income, and instead carry a capital loss back three years and forward five years to offset capital gains. Individuals carry losses forward for an indefinite period.

B. Corporations can net capital losses with ordinary income since they are taxed at the same rate.​ However, individuals can only carry losses forward for an indefinite period.

C. Corporations and individuals compute capital gains and losses the same way.​ However, corporations have a preferential tax rate for net capital gains that is lower than the ordinary income rate of​ corporations, so more corporations invest for gains.

D. Capital gains are computed the same way for corporations and individuals.​ However, capital losses are treated as a carry back of 5 years and a carry forward of 20 years for corporations. Individuals can only take capital losses in the year they are incurred.

Answer 1

The Capital gains and losses by a corporate taxpayer and an individual taxpayer are the same.

Diff. in the tax treatment of capital gains and losses by a corporate taxpayer and an individual taxpayer.

1. An individual taxpayer could use a capital loss to net against the taxpayer's ordinary income. however, the deduction is limited to $3000 per year. The remaining amount indefinitely carries over to subsequent years.
2. Besides, a capital loss of a corporate taxpayer can carry back 3 years and carry over 5 years to offset potential capital gains.
3. Tax rate for capital gains of a corporate taxpayer is less favorable than those of an individual taxpayer.