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New Member

Capital losses carry forward ?

Could someone please walk me over how to put in the 3000 loss limit and then track it for the next many years? Because I have about $40,000 capital losses.  And also, how does IRS track my losses for many years as I claim them?

Thanks,

Pooya

Level 15

Capital losses carry forward ?

The IRS doesn't track it, yet, that I know of.
TurboTax will prepare a capital loss carryover worksheet every year.

If you have a net $40K loss; you put -$3000 on line 13 of form 1040 and carry over $37K to next year.
Next year you reduce the  $37K by any capital gains (both long & short term) you realize in 2014, put another $3K on line 13 and carry the balance to the following year.
Example: you have $10k gains in 2014
   37,000 capital loss carried forward from 2013
- 10,000 capital gains in 2014
= 27,000 net capital loss for 2014
   - 3,000 allowed deduction
=  24,000 carried over to 2015
All of that will be shown on Schedule D and the worksheet
New Member

Capital losses carry forward ?

How does TurboTax do it automatically or carry forward my lost?
New Member

Capital losses carry forward ?

Question:  If I have $103,000 short-term capital losses in year 1, and carry over $100k of them to Year2, and:

 

  • $50k short-term gains in Y2; and
  • $40k long-term capital gains in Y2;

Do I *have* to use my carryforwards to offset the long-term capital gains in Y2 ?  In other words, could I elect not to apply those carryforwards, in the hope of applying them (more profitably) to short -term capital gains in Y3.

 

Assume marginal income tax rate 37% in all years.  Obviously, the value of applying the carryforwards to offset short-term capital gains (equal to 37% of those gains), would make them more "valuable" than using them to offset long-term capital gains in Y2 (20%).  I'd rather pay the 20% long-term rate and bank them. 

 

If this is allowed, how do I achieve it in Turbotax?

 

Level 15

Capital losses carry forward ?

Sorry ... you MUST use up the loss carryforward as prescribed in the IRS regs ... you cannot pick and choose which years you use them in .

 

Level 15

Capital losses carry forward ?

You have to report the carryover every year until it's used up.  You can't skip a year.  Even if you don't report it on your return you have to reduce it by the 3,000 (1,500 MFS) when you carry it over to next year.  You can't choose when to use it.

 

This is from the IRS Pub 550 page 66

"When you figure the amount of any capital loss carryover to the next year, you must take the current year's allowable deduction into account, whether or not you claimed it and whether or not you filed a return for the current year. "

 

Here is pub 550…  http://www.irs.gov/pub/irs-pdf/p550.pdf

 

If you have a negative AGI or negative taxable income it will show up on 1040  BUT it won't reduce the carryover to the next year.

New Member

Capital losses carry forward ?

Ouch!  So, effectively, there's no advantage whatsoever to holding stocks for >1 year until after I use all of my captial loss carryforwards.  Seems weird to me, b/c they require that like capital gain losses be used to offset like gains (thus requiring tracking of the two types of losses year-to-year).  So (at least to that extent), they protect collection of a higher tax, but mandate loss of a more valuable tax credit as described.  Thanks for you help!

Highlighted
Level 7

Capital losses carry forward ?

@dedrastonelindse 

 

You answer the TT questions about the sale of capital assets (or import the info from your broker). TT will create the Schedule D and other forms as needed.