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amecal
Returning Member

How does north carolina treats federal capital loss carryovers?

I moved to North Carolina in 2023 and have $22,000 in capital gain.  On my federal return, I have capital loss carryover from 2022 for the amount of $13,000.  My federal taxable capital gain is $7,000.  Can I also apply the capital loss carryover to my NC return?

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11 Replies

How does north carolina treats federal capital loss carryovers?

The software will apply carryovers, if allowed by your state.

 

@amecal 

How does north carolina treats federal capital loss carryovers?

If you moved to NC in 2023, it would seem you have no state of NC carryovers, regardless.

 

Caution: I'm no NC state tax expert.

How does north carolina treats federal capital loss carryovers?

NC calculates its tax based on federal Form 1040 Line 11..... so as you apply the carryover on your federal taxes, it has the same affect on the NC taxes - there is nothing special you have to do for NC.  

 

you are only paying taxes in NC on your capital gains, which are part of Line 11 already

amecal
Returning Member

How does north carolina treats federal capital loss carryovers?

Thank you, I understand that part,

but since we are part-year residents, in the NC return D-400 Sch PN, line 7, column B  shows only the 2023 gain disregarding the loss carryover.  Federal NET capital gain is 7,000 and amount attributable to NC is 22,000.

This causes line 24 (Part-year residents and nonresident taxable percentage) to be greater than 1, and therefore NC increases.

amecal
Returning Member

How does north carolina treats federal capital loss carryovers?

at the end of my message I meant to say that NC taxable amount increases as the percentage is greater than 1.  Otherwise the percentage should be less than one because we have wages not attributable to NC

How does north carolina treats federal capital loss carryovers?

@amecal - did the capital gains occur during the time you lived in NC or the time you lived in the other state? 

for simplicity, I assume they all occurred when you were living on one state or the other. 

 

if the 2023 capital gains all occurred when you were living in NC then Line 7, column B should be $7,000.  if the 2023 capital gains all occurred while you were living in the former state, then Line 7, column B should be zero. 

 

Under no circumstances should Column A be $7,000 and column B be $23,000.  What brought you to that conclusion? (and that is why you are getting a ratio greater than 1!).  Just because the loss carry forwards occurred while you were living in the former state doesn't mean you don't get credit for them now that you are in NC.

 

what you are doing on form PN is teasing out what on the federal form is reportable income to NC.  If all the stock sales that created federal income of $7,000 occurred while an NC resident, then that $7,000 is reportable to NC - it's that simple (you may be 'overthinking' this!)

 

ps I live in NC

amecal
Returning Member

How does north carolina treats federal capital loss carryovers?

Ours is a Part-Year resident NC return.  We were living abroad and had not filed a State return in several years.  For a Part-Year resident return, we need to file D-400 Schedule PN to compute the Part-Year Resident Taxable Percentage.

Columna A  on Schedule PN line 7, is $7,000 (NET federal capital gain after applying capital loss carryover).  Column B is 22,000 which is indeed our 2023 gain (all NC source),  before applying any federal capital loss carryovers from 2022.  Federal Capital loss carryover from 2022 is not being applied to line 7 column B.  

This affects the  NC Part-Year Resident Taxable Percentage (line 24 on Schedule PN) which increases the amount of NC taxes we have to pay.

 

 
 
As you know, Sch PN identifies amounts of income from all sources (Column A)  and amounts attributable to NC (Column B).
 
Line 7 is Capital Gain, and column A has the NET capital Gain reported on the federal Schedule D (gains minus federal capital loss carryovers).
From what I understand, NC does not follow federal rules on capital losses, and line 7 column B (amount attributable to NC), should be the 2023 capital gains disregarding the federal capital loss carryover.
 
Please advise, since 

How does north carolina treats federal capital loss carryovers?

<<From what I understand, NC does not follow federal rules on capital losses, and line 7 column B (amount attributable to NC), should be the 2023 capital gains disregarding the federal capital loss carryover.>>

 

can you please reference where you read this? what is the basis of your understanding.  Please document where it states that NC does not follow federal rules on capital losses! 

 

this is from the instructions (page 21)

 

https://www.ncdor.gov/2023-d-401-individual-income-tax-instructions/open

 

Lines 1 through 15. In Column A, Lines 1 through 15, enter the
income you received from all sources during tax year 2023. (If you
filed a 2023 federal income tax return, enter the amounts reported
on your federal return.) If married filing jointly, you must include
the total income from all sources of both spouses, even if only one
spouse is a resident. In Column B, enter the amount of Column A
received from North Carolina sources or income received while a
resident of North Carolina.

 

Column B has to be a subset of column A because the instructions state to enter the amount of column A ($7,000) that you received while an NC resident.  if you sold stock while an NC resident causing you to report $7,000 on the federal tax return, then that is what you put in Column B.  

 

 

amecal
Returning Member

How does north carolina treats federal capital loss carryovers?

You are right but I guess I didn't phrase the question correctly.  I wanted to know about Schedule PN Column A and Column B for part-year residents.

I believe I got the explanation I was looking for and I am sharing it with you all:

For North Carolina individual income taxes, federal capital loss carryovers are not recognized. You should include all capital losses in the year of disposition. Therefore, you don't need to adjust Column A or Column B on Schedule PN. Column A reflects total income including federal capital loss carryovers, while Column B includes only North Carolina-sourced income regardless of the Federal Capital Loss carryover.

How does north carolina treats federal capital loss carryovers?

can you please reference a link documenting the source of your information.   Your explanation is not how the instructions read.  

 

thank you.  

amecal
Returning Member

How does north carolina treats federal capital loss carryovers?

I dont see any contradictions to what you said.

My concern was that Column B was greater than Column A, resulting in 1.05 Part-Year Resident percentage (line 24, sched PN).  

Bottom line, I wanted to know if it was possible/correct to adjust the amount of Column A line 7 (federal capital gain) to match line 7 Column B (NC capital gain) and I hope I got the correct answer:  No adjustments are allowed in Column A, line 7.  And in general, I understand that lines 1 to 15 are populated by Intuit and no overrides or adjustments are allowed.

Everything else in Columns A and B looks correct and I was expecting to get a 1 in the percentage because income earned while non residents of NC was foreign income  and we are claiming the FEIE.  As a result, all federal  income  remaining after the FEIE, is earned in NC

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