Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 01-14-2008, 01:05 PM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,400
Blog Entries: 3
What happens when you sustain a capital loss of more than $3,000?

The IRS code allows taxpayer's who sustain capital losses in excess of $3,000 to be able to offset these against other capital gains. However, where you have no capital gains to offset these losses, Taxpayers are permitted to deduct $3,000 per year from their tax returns, with the balance carried forward to future years.

These losses are then available to be offset against other capital gains and if none exist, then another $3,000 loss is available for deduction in that year. Currently, the IRS has no restrictions on how many years these losses can be carried forward, so we can safely assume these losses can be carried forward indefinitely until they can be either offset against other future capital gains or until they are fully written off at a rate of $3,000 per year.

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 02-06-2008, 08:36 PM
Junior Member
 
Join Date: Feb 2008
Location: Houston, TX
Posts: 1
Quote:
Originally Posted by TaxGuru View Post
The IRS code allows taxpayer's who sustain capital losses in excess of $3,000 to be able to offset these against other capital gains. However, where you have no capital gains to offset these losses, Taxpayers are permitted to deduct $3,000 per year from their tax returns, with the balance carried forward to future years.

These losses are then available to be offset against other capital gains and if none exist, then another $3,000 loss is available for deduction in that year. Currently, the IRS has no restrictions on how many years these losses can be carried forward, so we can safely assume these losses can be carried forward indefinitely until they can be either offset against other future capital gains or until they are fully written off at a rate of $3,000 per year.
Do I understand correctly that if I have substantial capital gain losses from several years ago, I can deduct $3K per year whether or not I have any capital losses in a given year? If so, where do I show the deduction?
Regards,
Donahy



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 02-07-2008, 06:08 PM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,400
Blog Entries: 3
Yes! You simply carry over the losses from the prior year less $3,000 taken in that year. The balance is carried over to Schedule D. There is no requirement that you need to have capital losses in the following year in order to carryover the prior year losses into the next year.

For example, lets say you sustained losses of $35,000 in 2006, and there were no capital gains to offset these losses, so you are allowed to deduct $3,000 in tax year 2006. The balance of the losses $32,000 ($35,000 - $3,000) are carried forward to year 2007 no matter what your capital gain or loss situation. If there are no capital gains then $3,000 are deductible in Tax Year 2006.

If you have further capital losses lets say, another $10,000, then $3,000 are deductible from the prior years carryover of losses, and the remaining balance from the prior year would now be $29,000 ($32,000-$3,000) and current year losses of $10,000 are combined to yield a total capital losses carryover of $39,000 which are carried over to Tax Year 2007.

The carryover losses are entered on Schedule D, lines 6 and 14 indicating short term or long term carryover losses respectively.

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning