# Zeno Inc. sold two capital ass

Zeno Inc. sold two capital assets in 2020. The first saleresulted in a \$53,000 capital loss, and the second sale resulted ina \$25,600 capital gain. Zeno was incorporated in 2016, and its taxrecords provide the following information:

2016 2017 2018 2019

Ordinary income \$443,000 \$509,700 \$810,300 \$921,000

Net capital gain 22,000 0 4,120 13,600

Taxable income \$465,000 \$509,700 \$814,420 \$934,600

Required: Compute Zeno’s tax refund from the carryback of its2020 nondeductible capital loss. Assume Zeno’s marginal tax ratewas 34 percent in 2016 and 2017, and 21 percent in 2018 and2019.

Zeno has a \$27,400 nondeductible net capital loss in 2018. Itcan carry the loss back three years to deduct against net capitalgain in those years. Zeno can deduct \$4,120 capital loss carrybackagainst 2016 capital gain and \$13,600 capital loss carrybackagainst 2017 capital gain to generate a \$6,025 tax refund (\$17,720× 34%)

Zeno’s capital loss carryforward is \$9,680 (\$27,400 -\$17,720).

(The capital loss carry back for preceding 3 pevious year andcarry over 5 succeding year

Carry back of losses will be from 2015-2017

Capital gain \$25600

Capital loss \$53000

Net capital loss (27400)

2016 2017 2018 total losses carry back
Net capital gain 0 4120 13600
Carry back capital losses 4120 13600 17720

a) Computation of Zeno tax refund as 34%

34% tax refund of \$ 17,720

= 6024.8

Rouded off = 6025

b)Computation zeno’s capital loss carryforward into 2020.

=(53000 – 25600) – 17720

Capital loss carry forward = 27400 – 17720

= \$9,680)

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