How to carryback capital losses to prior years

[S_Dave]

I have capital gains in 2020, 2021, and massive realized losses in 2022, and 2023 once that ends.

I want to use my 2022 losses to offset the gains in 2020 before the 3 year window expires. I would then like to use my remaining 2022 losses as well as 2023 losses to offset 2021 gains.

How would I do that? Is there a separate form I must fill out

[DoninGA]

Capital losses cannot be carried back to prior tax years, they can only be carried forward to each tax year until the losses have all been used.

[S_Dave]

Is this correct?

I read this.

"

• A noncorporate taxpayer (individual, trust or estate) may carry forward unused capital loss indefinitely. The carried over losses retain their character as long-term or short-term losses (IRC § 1212(b)). See Explanation: §1212, Non-Corporate Taxpayer's Capital Loss Carryover. An individual may also carry back net IRC § 1256 contract losses for three years (IRC § 1212(c)). See Explanation: §1212, Individual’s Carryback of Capital Losses from Sec. 1256 Contracts. Otherwise, noncorporate taxpayers cannot carry back capital losses.

"

The site is here. https://answerconnect.cch.com/document/arp28d1b3da7a7b[phone number removed]1b78be8c7808bCOPY/federa....

[VolvoGirl]

And See  this similar post

https://ttlc.intuit.com/community/taxes/discussion/capital-loss-carryback/00/3112458

[Mike9241]

@S_Dave do you have section 1256 losses in 2022 and 2023? they would be reported on form 6781 before the losses are carried to schedule D. To be able to do a carryback you would need both net capital gains and 1256 gains in the carryback year

[S_Dave]

Hi @Mike9241 

In reporting year 2021, i have section 1256 gains and in 2022, i have massive 1256 losses.

In terms of forms, i only have 1099B forms, but there is a section for "Section 1256 Option Contracts ".

[Mike9241]

There's a three-year carryback for 1256 contracts. 

Your net section 1256 contracts loss is the smaller of:
• The excess of your losses from section 1256 contracts over the total of (a) your gains from section 1256 contracts plus (b) $3,000 ($1,500 if married filing separately), (I believe that $3000 is zero if you have other security losses of $3000 or more) or  
• The total you would figure as your short-term and long-term capital loss carryovers to 2023 if line 6 of Form 6781 were zero. Use a separate Schedule D (Form 1040) and Capital Loss Carryover Worksheet (in Pub. 550) to figure this amount. 
The amount you can carry back to any prior year is limited to the smaller of:
• The gain, if any, that you would report on line 16 of Schedule D (Form 1040) for that carryback year if only gains and losses from section 1256 contracts were taken into account; or
• The gain, if any, reported on line 16 of Schedule D (Form 1040) for that carryback year.
The amounts just described are figured prior to any carryback from the loss year. Also, the carryback is allowed only to the extent it doesn’t increase or produce a net operating loss for the carryback year. The loss is carried to the earliest year first.

[S_Dave]

@Mike9241  do i have to do a three year?

For example, i don't have any section 1256 gains/losses for 2020. I have gains in 2021 and huge losses in 2022.

If i have to do 3 years, should i just wait for 2023 to end to amend 2021 and 2022 together when i file for 2023?

[Mike9241]

no 1256 gains in 2020 then the carryback is to 2021.  I would do the c/b from 2022 first. you'll probably get your 2021 refund sooner than if you wait to do both 2022 and 2023 c/b to 2021.  c/b can take up to 6 months to process. The downside is that you'll have to amend 2021 twice. 

[S_Dave]

@Mike9241  thank you so much for be so responsive! I really appreciate the advice.

My situation just got a little stickier. 2022 was the first year that I realized TurboTax requires you to manually enter in your gains/losses from section 1256. Previous years I just used the import process and assumed TurboTax would auto calculate everything.

Looking back at 2021, I realized I never entered in my gains for 1256, however my losses from 2022 should still completely offset those.

I noticed in TurboTax when entering section 1256, you get the options to enter in both gains and losses. There is also a radio button to select "Loss carryback from future year".

Since i never entered my 1256 gains for 2021, can I simply just amend it now and enter in both the gains from 2021 and the losses from 2022?

Granted, i have to update 2022 regardless since i need to decrease the losses to just reflect the remaining portion.

[Mike9241]

This is just an opinion.  i would file 2022 first with the loss carryback election checked and then say in 2 weeks file an amended 2021 return. I am sort of surprised you haven't received notification from the IRS for 2021 about the missing 1256 reporting but some things take the IRS 2 years to catch up on. 

when you mail the returns be sure to use a tracking method so you are assured the IRS got it. 

you check the loss carryback box only in the 2022 return, however, it seems your version of TurboTax is different than mine because I don't see the exact same thing you presented. Later on another screen it should ask about the amount to be carried back enter as a positive number and remember the limitations. .

for 2021 you need to amend. 

on line 1 of form 6781 separately enter “Net section 1256 contracts loss carried back from” and the tax year in column (a), and enter the amount of the loss carried back to 2021 in column (b).