1120-US: Prior C Corporation loss carryovers used to reduce built-in gain tax (FAQ)

Alerts and notices

Question

Why are some of the prior C Corporation loss carryovers limited in calculating the built-in gains tax?

Answer

Capital Loss Carryover: The prior C Corporation capital loss carryover is allowed to the extent the net built-in gain is net capital gain. Capital loss carryovers cannot offset net built-in gain that is ordinary income.

Minimum Tax Credit Carryover: The prior C Corporation minimum tax credit carryover is limited under IRC section 55(e)(5). The credit allowed is reduced by 25% of the amount by which regular tax exceeds $25,000.

Related topic: 1120-US: Built-in gain tax calculation for S Corporations FAQs