Capital Losses Carryforwards, Reading 12, Ex. 8

[cfastudent88]

Could somebody help me with this one?
As the carryforwards are 1.5 mln Dollar are counted in, why is the total tax on the sale and lease back 0$?
Shouldnt it be:
(5 - 1,5) * 0,25 = 0.875 mln $?
(Capital Gain from selling item - capital loss carryforwards) * tax rate?
Thanks in advance!

 

[cfastudent88]

Can someone help?

 

[cpk123]

you incurred the loss after taxes in a previous year. so that capital loss is fully applicable - you would not have tax on it again. that is 5 * 0.25 = 1.25M is your capital gain tax, and you can offset that by your 1.5 Mill Loss - so you get the full benefit of 5M now.