Pure Action Cycles Inc., a bicycle manufacturer, has a net capital loss in 2019 of $(64,000). It had net capital gains of $21,500 in 2018, $45,000 in 2017, $10,000 in 2016 (but suffered a net operating loss in 2016), and $8,000 of net capital gain in 2015. What is the net capital gain in 2018 after the carryback is applied?
What will be an ideal response?
$2,500 capital gain, computed as follows:
| Description | Amount | Explanation | ||
| (1) | Net capital loss in 2019 | $ | 64,000 | |
| (2) | Net capital gain offset in 2017 | 45,000 | The net capital loss is not carried back to 2015 because the net capital loss can only be carried back three years. It cannot be applied to the net capital gain in 2016 because the corporation suffered a net operating loss that year. | |
| (3) | Remaining capital loss carryback | 19,000 | (1) - (2). | |
| (4) | Net capital gain in 2018 | 21,500 | ||
| Remaining capital gain in 2018 | $ | 2,500 | (4) - (3). | |
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