a. A C corporation (i) can use its capital losses only to offset capital gains but (ii) can generally carry a net capital loss back 3 years and forward 5 years (individuals can use capital losses to offset limited amounts of ordinary income and can carry net capital losses forward, but not back, indefinitely).

How are C corporations taxed on capital gains?

Unlike individuals, who enjoy preferential tax treatment for long-term capital gains, C corporations do not get preferential tax treatment for long-term capital gains. Capital gains are simply added to the corporation’s ordinary income along with other income items and taxed at the corporate tax rates.

Can a capital loss be offset against a capital gain?

In a C corporation, capital losses can only be offset against capital gains. However, the converse is not true. If a corporation has a capital gain, it is taxed the same as any other income, at the corporations incremental tax bracket. Thus any operating loss carryovers can be used to offset the capital gain.

How are capital losses carried back for a C corporation?

C corporations: A C corporation deducts capital losses up to the amount capital gains in any given tax year. If in any year, a C corporation’s capital loss exceeds capital gains of that year, the excess loss is carried back in a specific order then may be carried forward up to 5 years.

Where does the capital loss go on a 1040?

If you have other capital gains, the loss will offset some or all of the gains. Otherwise, up to $3,000 of the capital loss will go to line 13 of Form 1040 and offset other income. The remaining loss over $3,000 will be carried forward each year until used up (applied to capital gains and/or ordinary income).

How to zero out capital gains for a C corporation?

You had a short-termcapital gain of $5,000 and a long-termcapital gain of $2,000. You first reduce the short-term gain by $5,000, zeroing it out. Then, you reduce the long-term gain by $2,000, zeroing it out. Refigure your tax for 2014 and apply for a refund.