Are Form 1120 Schedule M 3 Amounts 2019-2024

Hello and welcome to this session. This is Professor Farmhand. In this session, we will look at capital gains and losses for corporations. So, what are capital gains and capital losses and how does the corporation treat them? Well, it's worth first looking at how individuals treat capital gains and capital losses before we discuss corporations because we want to keep those two rules separate. The way corporations treat capital gains and capital losses is different from how individuals treat them. So, how do individuals treat capital gains and losses? Well, for individuals, we have a preferential tax treatment for long-term capital gains. If an individual has a long-term capital gain, it is taxed at 20%. A short-term capital gain is subject to the regular tax rate. Additionally, individuals can deduct up to $3,000 in net capital losses against ordinary income. Any remaining losses can be carried forward indefinitely. Now, let's move on to corporations. For corporations, there is no special tax rate that applies to capital gains. Capital gains are considered ordinary income for corporations. This means that the entire gain is included in the corporation's income and subject to the normal corporate tax rate. Additionally, corporations cannot deduct net capital losses. However, any unused capital losses can be carried back three years or carried forward five years. All carried-over losses are treated as short-term losses for corporations. The important thing to note is that the corporate law does not differentiate between short-term and long-term gains. They are all subject to the normal corporate tax rate. To determine the overall capital gain or loss, we net the short-term and long-term gains. Eventually, we will end up with either a capital gain or a capital loss, and it doesn't matter if it is short-term or long-term. Let's look at an...