During 2017, Gorilla Corporation has net short-term capital gains of $15,000, net long-term capital losses of $105,000, and taxable income from other sources of $460,000. Prior years' transactions included the following.
2013 net short-term capital gains........................$40,000
2014 net long-term capital gains...........................18,000
2015 net short-term capital gains..........................25,000
2016 net long-term capital gains...........................20,000
a. How are the capital gains and losses treated on Gorilla's 2017 tax return?
b. Determine the amount of the 2017 capital loss that is carried back to each of the previous years.
c. Compute the amount of capital loss carryforward, if any, and indicate the years to which the loss may be carried.
d. If Gorilla is a sole proprietorship, rather than a corporation, how would the owner report these transactions on her 2017 tax return?
e. Assume that Gorilla Corporation's capital loss carryfoward in part (c) is $27,000, and that Gorilla will be able to use $11,000 of the carryover to offset capital gains in 2018 and the remaining $16,000 to offset capital gains in 2019. In present value terms, determine the tax savings of the $105,000 long-term capital loss recognized in 2017. Assume a discount rate of 5% (present value factors are in Appendix F). Further, assume Gorilla Corporation's marginal income tax rate is 34% for all tax years.