Using carryover capital loss on real estate gains (less than 1 year ownership)

[dcdp68]

I entered the 2023 tax season with the following carryovers.

       -Short-Term Capital Loss: $15,000

       -Long-Term Capital Loss: $10,000

In years past I have claimed the $3,000 loss to my ordinary income out of these losses.

During 2023 I sold two pieces of real estate.

Property 1: 

            -Owned 2 Months

            -Net Gain $25,000

Property 2: 

            -Owned 10 Months

            -Net Gain $44,000

1. Is it correct that neither of the carry-over capital losses can be used to offset the real estate gains because all real estate gains held for less than 1 year are treated as ordinary income?

2. If the properties were sold after owning them for 13 months could I have used both the Short & Long term carry-over capital losses?

3. If the properties were sold after owning them for 25 months could I have used both the Short & Long term carry-over capital losses?

[JohnB5677]

1a. Is it correct that neither of the carry-over capital losses can be used to offset the real estate gains 

• No!  A capital loss is a loss on the sale of a capital asset such as a stock, bond, mutual fund or real estate and can typically be used to offset other capital gains or other income.

1b. because all real estate gains held for less than 1 year are treated as ordinary income?

• All short term gains are treated as regular income.

2. If the properties were sold after owning them for 13 months could I have used both the Short & Long term carry-over capital losses?

• Yes, but you can use both for short term gains also.  First, short-term losses are used to offset short-term gains, and long-term losses are used to offset long-term gains. Then, if there are any losses remaining, they can be used to offset the opposite type of gain.

3. If the properties were sold after owning them for 25 months could I have used both the Short & Long term carry-over capital losses?

• Yes, but there is no difference between 13 months an 25 months

So in the example you sited above you can offset $25,000 of capital gain with your carrover losses.

[dcdp68]

Thanks John! I'll send this to my tax pro. This was very helpful.