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Describe the differences between Capital losses and Operating losses. How can a C-Corp use these losses?

Describe the differences between Capital losses and Operating losses. How can a C-Corp use these losses?

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Answer #1

Operating losses arise in the normal course of operations of the business.

A capital loss arises when the business sells a capital asset such as stocks. Both receive different tax treatments in the books of C-Corp.

A capital loss is deducted from Capital gains earned during the year which is reported on the tax return. It is also allowed to be carried back if it cannot be offset completely upto 3 years. The operating loss is set off against the revenues of the company in that year itself.

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