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New Member
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Feb 26, 2007, 08:55 AM
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Short term vs long term capital gains, loss carryovers
Back in 2000 and 2001, I had short term capital losses that exceeded the 3000 dollar limit.
Each year, I've been able to deduct 3000 dollars since my short term gains have been minimal.
I still haven't used up all my 2000 and 2001 short term losses.
I had some long term gains in 2000, but none since then.
Do you keep track of long term and short term losses separately?
As as example, lets say I have a clean slate in 2001.
Then, I lost 50,000 dollars, short term in 2002.
In 2003, I made 30,000 dollars long term. There were no short term gains in 2003.
Then in 2004, I made 10,000 short term, no long term gains.
What would my 2003 and 2004 tax situation be?
Thanks, Dave.:confused:
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Senior Tax Expert
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Feb 27, 2007, 10:57 AM
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Dave:
It makes no difference whether the loss is short-term or long-term once you are in carryover mode.
The loss offsets any gain experienced in future years, or $3,000 per year, until you use it up.
If you need my professional tax help, contact me at [email protected].
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New Member
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Apr 16, 2007, 02:45 PM
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Originally Posted by AtlantaTaxExpert
Dave:
It makes no difference whether the loss is short-term or long-term once you are in carryover mode.
The loss offsets any gain experienced in future years, or $3,000 per year, until you use it up.
Of course the federal government disagrees with you. In Publication 550 on p.66, which you can find here:
http://www.irs.gov/pub/irs-pdf/p550.pdf
It says:
When you carry over a loss, it remains long
Term or short term. A long-term capital loss you
Carry over to the next tax year will reduce that
Year’s long-term capital gains before it reduces
That year’s short-term capital gains.
Therefore, if you have $50k in long term losses that you are carrying over, and the next year you have $50k in short term gains and $50k in long term gains, then the carried over losses will offset the $50k in long term gains, and you will owe taxes on $50k in short term gains. On the other hand, if the carried over losses were short term losses, then the losses would offset the $50k in short term gains, and you would owe taxes on $50k in long term gains.
Which would you rather pay? Taxes on $50k in long term gains or $50k in short term gains?
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Senior Tax Expert
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Apr 23, 2007, 01:44 PM
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You are correct. I assumed that future writeoffs would be against ordinary income, not future gains, hence making the type of loss irrelevant.
My error.
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Tax Expert
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Sep 9, 2010, 01:52 AM
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Loss from sale of shares is capital loss reported on schedule D (Form 1040). You can use your total net loss to reduce your income by up to $3,000. You can carryover the unused part to the next year and treat it as if you had incurred in that next year. When you carry over a loss, it remains long term or short term. A long term capital loss you carry over to the next tax year will reduce that year's long-term capital gains before it reduces that year's short-term capital gains. When you are figuring your capital loss carryover, use your short-term capital losses first. You must use a capital loss carry forward (up to $3000) whether you need it or not.
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