Question

Newt, Inc. incurs capital losses of 500 and capital gains of 100 in the current year. How much net capital gain or loss will Newt recognize in the current year for tax purposes?

1) 400 capital loss
2) 100 capital loss
3) 100 capital gain, since capital losses are NOT deductible

Answer 1

Newt, Inc. will recognize a net capital loss of $400 for tax purposes in the current year.

Step-by-step explanation:

Newt, Inc. will recognize a net capital loss of $400 for tax purposes in the current year.

This is calculated by subtracting the capital losses of $500 from the capital gains of $100. Since capital losses are deductible, Newt will be able to offset $400 of its taxable income in the current year.