@Carl wrote:
Basically, the carry over losses carry over to the estate and included on the estate return. How those losses are dealt with on the estate return, depends on how the dissolution of the estate is handled.
No, capital losses do not carry over to the estate.
Rather, any capital losses of the decedent are first used to offset capital gains on the final income tax return of the decedent. Thereafter, up to $3,000 of excess capital losses can be used to offset all other types of income. Any net losses that exceed that $3,000 are simply lost - forever.
The assets in the estate are stepped up (or down) to their fair market value on the date of death of the decedent. Again, unused net capital losses (the amount that exceeds $3,000) disappear.
