ACCA421-Homework03.10.11

ACCA421-Homework03.10.11 - The Difference Between An...

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The Difference Between An Ordinary Loss and A Capital Loss Keri D. Josey (000-03-8220) ABSTRACT Lecturer: Mr. Terrance Richards Date: March 10, 2011
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For tax purposes, the terms capital loss and ordinary loss have specific meanings as a different tax treatment applies to each type of loss. An ordinary loss is any loss incurred by a taxpayer that is not considered a capital loss. Ordinary losses can stem from many causes, including casualty and theft. Ordinary losses that are larger than a taxpayer's gross income for the year can leave the client with zero taxable income. Ordinary losses are not subject to the $3,000 annual limit that is imposed on capital losses, as they can be for any amount i.e. they are 100% deductible in the year incurred. Business owners who fail to make a profit for the year can declare an ordinary loss on their returns. Ordinary losses are netted against ordinary income, which is taxed at the taxpayer's highest marginal tax rate which can therefore offer the taxpayer greater tax savings than long-term capital
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ACCA421-Homework03.10.11 - The Difference Between An...

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