Final answer:
The adjusted net capital gain for Pure Action Cycles Incorporated in 2021, after applying the capital loss carryback from 2022, is $19,450.
Step-by-step explanation:
The student asked about how to adjust a company's net capital gain from 2021 for a net capital loss incurred in 2022. To determine the adjusted net capital gain for 2021 after accounting for the capital loss carryback, we would follow the tax rules regarding loss carrybacks.
In the United States, businesses are allowed to carry back net capital losses to the previous three years and carry forward the loss for up to five years. In this scenario, Pure Action Cycles Incorporated had a net capital loss of $(67,000) in 2022.
We can apply this loss to the net capital gains of the previous years in the order they occurred, beginning with the earliest year. The gains from previous years were:
- 2018: $8,300 net capital gain
- 2019: $10,300 net capital gain
- 2020: $46,500 net capital gain
- 2021: $21,350 net capital gain (Before carryback adjustment)
To adjust the net capital gain in 2021 after the carryback:
- First, apply the $(67,000) loss against the $8,300 gain from 2018. Remaining loss: $(67,000 - $8,300) = $(58,700)
- Next, apply the remaining loss against the $10,300 gain from 2019. Remaining loss: $(58,700 - $10,300) = $(48,400)
- Then, apply the remaining loss against the $46,500 gain from 2020. Remaining loss: $(48,400 - $46,500) = $(1,900)
- Finally, apply the remaining loss of $(1,900) to the 2021 gain of $21,350.
The net capital gain for 2021 after the carryback is applied will be $21,350 - $1,900 = $19,450.