In 2012, Bluebird Corporation Had Net Income from Operations of $75,000

question 16

Multiple Choice

In 2012, Bluebird Corporation had net income from operations of $75,000. Further, Bluebird recognized a long-term capital loss of $30,000, and a short-term capital gain of $10,000. Which of the following statements is correct?

• A)Bluebird Corporation may use the capital loss to offset the capital gain and must carry the net capital loss of $20,000 forward five years as a long-term capital loss.
• B)Bluebird Corporation may deduct $13,000 of the capital loss in 2012 and may carry forward the remainder of the capital loss indefinitely to offset capital gains.
• C)Bluebird Corporation will have taxable income in 2012 of $55,000.
• D)Bluebird Corporation will have taxable income in 2012 of $75,000 and will have a net capital loss of $20,000 that can be carried back 3 years and forward 5 years.
• E)None of the above.

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Definitions:

Private Investment

Expenditures by private sector entities on capital goods that are used to produce goods or services in the future.

Government Spending

The total of all public sector expenditures, including public goods and services provided, and investments made by government agencies.

Federal Government

The national government of a federal country, where powers are divided among a central authority and constituent political units.

Private Investment

Expenditures by private sector entities on means of production, such as infrastructure or equipment, intended to yield future returns.