Question

Harrison Corporation generates capital gains/(losses) of $30,000, $2,000, ($40,000) in 2016 to 2018, respectively. Harrison started operating in 2016. What is Harrison's capital loss carryforward into 2019?

(a) $30,000
(b) $2,000
(c) ($40,000)
(d) $12,000

Answer 1

Harrison's capital loss carryforward into 2019 is (d) $12,000. (option d)

Step-by-step explanation:

To calculate Harrison Corporation's capital loss carryforward into 2019, we need to sum up the capital gains and losses from the previous years. The capital loss carryforward is the net result of these gains and losses that can be carried forward to offset future capital gains. The calculation is as follows:

`\[ \text{Capital Loss Carryforward} = \text{Capital Gains/Losses 2016} + \text{Capital Gains/Losses 2017} + \text{Capital Gains/Losses 2018} \]`

`\[ \text{Capital Loss Carryforward} = $30,000 + $2,000 - $40,000 = $12,000 \]`

Therefore, the correct answer is (d) $12,000.

Harrison Corporation experienced a net capital loss of $40,000 in 2018, which can be offset against the capital gains of $32,000 ($30,000 + $2,000) from 2016 and 2017. As a result, $8,000 of the capital loss was utilized to offset the gains, leaving a capital loss carryforward of $12,000 into 2019. This amount can be used in future years to offset any capital gains Harrison may incur.(option d)