 Hello and welcome to this session in which you would look at an exercise or a CPA exam simulation that deals with capital gains and capital losses. Now this could be a simulation where I can give you four different questions and this is how I'm going to solve it, where I can give you this information and give you four different questions with four multiple choices and ask you to answer the same multiple choice. What I'm trying to say is any simulation could be turned into a multiple choice, any multiple choice could be turned into a simulation. The key to solve any simulation or any multiple choice questions is to understand the concept, which is this is what I pride myself on, on helping you understand capital gains and capital losses. So let's go ahead and get started. Before we proceed any further, I have a public announcement about my company farhatlectures.com. Farhat Accounting Lectures is a supplemental educational tool that's going to help you with your CPA exam preparation as well as your accounting courses. My CPA material is aligned with your CPA review course such as Becker, Roger, Wiley, Gleam, Miles. My accounting courses are aligned with your accounting courses broken down by chapter and topics. My resources consist of lectures, multiple choice questions, true false questions as well as exercises. Go ahead, start your free trial today. In 2020, during the year 23, NOAA Corporation, so we're dealing with a corporation, has not short-term capital gains of 17,000, long-term capital losses of 107, and taxable income from other sources of 480,000. This is year 2023. We are also given year 2022, year 2021, year 20, and year 19. We are told how capital losses are treated for the year 23, assuming NOAA is a corporation. Well, assuming NOAA is a corporation, the first thing we're going to do, we're going to use the losses to offset any gains. Well, we have lots of losses. So we have gains of 17,000. We have losses of 107. So we're going to be able to wipe out all the gains, so we don't have to pay taxes on the gain. As a matter of fact, it's not only we don't have any capital gains to pay taxes on, we're going to have $90,000 of access losses. Well, what can we do with this $90,000 of access losses? Well, this is a corporation. Well, what amount? So we answer the first question. The first question is, what can we do with the access gain for 2023? Nothing for 2023, not applicable. But we can carry back this amount. How can we carry back this amount? Well, we're going to take this $90,000 of losses and we can carry it back three years. And we're going to start with the earliest, year 2020. The year 2020, we have $20,000 of capital gains. We can wipe this out. In year 2021, we should have leftover. We have $27,000 of capital gains. Again, we'll amend the return and we'll get a refund, wipe this out. In 2022, we have $22,000. Oh, year 2022, $22,000. $22,000 of capital gains. Also, we can wipe this out. So let's see. So of the $90,000 that we have and carry back, let's go ahead and use it up. $90,000 taken away $20,000 taken away $27,000 taken away $22,000. I'm going to have leftovers of $21,000 of capital losses. What am I going to do with this $21,000? This is the amount that's going to be carried forward. I'm going to take this. So the answer for the amount carried forward is $21,000. And I can carry forward this for five years. Now, the question becomes, what if NOAA was an individual? What if NOAA was an individual rather than a corporation? What could NOAA do? Well, here's what could NOAA do. First, NOAA will net the capital gains against the capital losses. And NOAA would have, again, $90,000 of access losses. What are we going to do with this access losses? This access losses of this amount will be able to use up $3,000 this year as capital losses. We can take those capital losses this year of how much? $3,000. Of the $3,000, what's left is $87,000. What are we going to do with this $87,000? We're going to carry this losses of $80,000. We're going to carry it indefinitely until we use it up. So the next years in the foreseeable future, simply put, any as an individual, NOAA could generate capital gains up to $87,000 and don't pay any taxes on them. Why? Because NOAA can use the carryover of long-term capital losses. There are long-term capital losses to wipe out any capital gains. So you want to make sure you know the difference between the two. Am I dealing with an individual situation? Am I dealing with a corporation? Once again, this could be a multiple choice, four different multiple choices. Tell me what happened in 2023. What's the amount of carryback? I could even ask more than four multiple choice questions about a question like this or it could be one whole simulation. What should you do now? What should you do now? Go to Farhat Lectures. Look at additional resources, lectures, multiple choice, true, false. That's going to help you. An important topic on the CPA exam and the enrolled agent as well as your accounting courses. Capital gains and capital losses for corporations as well as individuals. Good luck, study hard and of course, as always, stay safe.