In the Current Year, Estes Has Net Short-Term Capital Losses

question 62

Essay

In the current year, Estes has net short-term capital losses of $3,000, a net long-term capital loss of $45,000, and taxable income from wages of $35,000.
a.Calculate the amount of Estes' deduction for capital losses for the current year.
b.Calculate the amount and nature (short-term or long-term) of his capital loss carryforward.
c.For how many years may Estes carry the unused loss forward?

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Definitions:

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated before the next period begins.

Cost of Goods Sold

The total cost of materials and labor needed to produce the goods or services sold by a company.

LIFO Inventory Method

An accounting method where the last items of inventory purchased are the first ones used or sold, affecting the cost of goods sold and ending inventory values.

FIFO Inventory Method

A method of accounting for inventory that assumes the first items placed in inventory are the first sold.