Choice a is incorrect this choice does not take into

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Unformatted text preview: ey asked solely for the dollar amount. Choice "a" is incorrect. This choice does not take into consideration the amounts distributed during the year. Choice "c" is incorrect. This choice does not take into account any of the current year activity that becomes part of accumulated earnings and profits at year-end. Choice "d" is incorrect. This choice treats the distributions of $12,000 as an addition to the deficit, making it $57,000. It ignores the current year earnings and profits entirely. CPA-01867 Type1 M/C 4. CPA-01867 Nov 91 II #41 A-D Corr Ans: D PM#4 R 3-01 Page 19 A corporation's capital loss carryback or carryover is: a. b. c. d. Not allowable under current law. Limited to $3,000. Always treated as a long-term capital loss. Always treated as a short-term capital loss. CPA-01867 Explanation Choice "d" is correct. A corporation's capital loss carryback or carryover is always treated as a short-term capital loss. Rule: Corporations may not deduct any capital loss from ordinary income, but instead only carry it back 3 years and forward 5 years as a "sh...
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