Question

I have included the answer to my question below. Please kindly explain why the long-term capital loss is not included in the taxable income calculation as well as the capital loss carryover from the previous year. Thank you in advance.

Facts:

 Greco Glass Products ("GGP") is a C Corporation.

 GGP had gross revenue from sales in 2017 of $2,300,000.

 GGPs cost of goods sold for the 2017 sales was $952,000.

 GGP incurred a long-term capital loss in the amount of $48,000.

 GGP had a capital loss carryover from 2016 of $15,000.

 GGP made cash charitable contributions totaling $135,000.

 GGP made contributions to Ronald Stump’s presidential campaign in the amount of $50,000. ---------------------------------------------------------------------------------------------------------

Question: 1. What is GGP’s taxable income for 2017? Show your work. (35 points)

Gross receipts or sales $2,300,000

Cost of goods sold ($952,000)

Gross Profit $1,348,000

Charitable contributions ($134,800)

Taxable Income = $1,213,200

Answer 1

Sales Revenue........... 2,300,000
COGS .................. (952,000)
Gross Profit 1,348,000
Charitable Contributions (134,800)
Taxable Income 1,213,200
Capital Loss can’t be deducted because there are no capital gains present and donations to election campaigns are not tax deductible.
Capital losses are special incomes that can be deducted only form capital gains so both capital losses and capital losses from previous years are not included in gross income.

Charitable contributions should be 10% of taxable income so if we take 1,348,000 *10% = 134,800 and we carryforwad $200 into next year

GGP incurred a long-term capital loss in the amount of $48,000.
GGP had a capital loss carryover from 2016 of $15,000.

48,000 + 15,000 = 63,000
So we carryforward 63000 in 2018