John (a sole proprietor) and Eagle Corporation (a C corporation) each recognize a long-term capital gain of $10,000 and a short-term capital loss of $18,000 on the sale of capital assets. Neither taxpayer had any other property transactions during the year.

a. Regarding John's gains and losses, label each of the following as "True" a tax consequence or "False" not a tax consequence.

1. John reports the capital transactions on his individual tax return and deducts a $18,000 net capital loss in the current year.

2. John reports the capital transactions on his individual tax return but is limited to a $3,000 net capital loss deduction in the current year.

3. John nets the $10,000 LTCG against the $18,000 STCL.

Regarding Eagle Corporation's gains and losses, label each of the following as "True" a tax consequence or "False" not a tax consequence.

1.

Eagle Corporation nets the $10,000 LTCG against the $18,000 STCL, resulting in a $8,000 net capital loss.

2.

Eagle is limited to a $8,000 net capital loss deduction in the current year.

3. All of the $18,000 net capital loss is deductible in the current year.

4. Eagle carries back a $8,000 STCL 3 years and, if necessary, forward 5 years, to be offset against capital gains in such years.