tax credit for capital gains losses ??

mafibisha

DIS Veteran
Joined
Mar 9, 2002
Messages
2,819
Ok, I know someone here knows the answer(s) to this because really, as someone else just said, You Guys Know Everything!!! :thumbsup2

Talking with some friends Saturday, (no accountants but educated peeps LOL) someone mentioned getting tax credit for 2010 for their capital gains losses in 2009. Realizing we all took a loss (if you have any stocks, or investments) we were all a little leery. But he said there are two lines on schedule D for it.

Someone said you needed to *sell* stocks at a loss before you took the tax credit, but this guy insists his accountant got hiim tax credit without selling, just because it took a major *hit* or loss.

So is he right? Was he under the influence? LOL Or somewhere in between? :confused3

TIA!
 
Totally not a tax expert, but AFAIK you have to sell to actually experience the loss. You can't write off a paper loss. Unless you want to start paying taxes on your paper gains. I think your friend was mistaken unless he has some very unique tax situation (which I can't think of of what that would be).
 
full of baloney
You have to sell the stock. In the case you are mentioning, you sell stocks in 2009, take $3000allowable loss ion 2009 return and get carryover for the rest of the loss which was not used to offset other capital gains. there are places to put the carry over loss in 2010, but not if you didn't sell the stock.
 
this guy insists his accountant got hiim tax credit without selling, just because it took a major *hit* or loss.

One of his stocks became completely (as opposed to mostly) worthless. If you own a stock that's cancelled in corporate bankruptcy, for instance, it's treated as a sale even though you didn't act to sell it.
 

You have to realize a loss before you can deduct it on your taxes. So its either sell the security or have it written off as worthless as in the case of a bankruptcy and a cancelled stock.
 
And as additional clarification, its not considered a tax 'credit'...taking a loss on the sale of an investment just reduces your taxable income.
 
Thanks all.
As I said, we were all leery and didn't think it was possible, unless maybe it was a bankruptcy.
 
And as additional clarification, its not considered a tax 'credit'...taking a loss on the sale of an investment just reduces your taxable income.

And it isn't a "capital gains loss". You either have a "capital gain" (you sold for more than you bought) or a "capital loss" (you sold for less than you bought).
 
Gain or loss is based on the sale of stock (or it's becoming worthless). At that time you will have a capital gain or a capital loss. For items held less than a year the gain or loss is short term, for a year or longer it is long term.

On Schedule D you compute the Short and Long Terms items separately and then combine them. If the net loss is less than $3,000, you can apply the amount of loss against ordinary income. If the net loss is $3,000 or more you can use $3,000 to offset ordinary income and carry the unused portion forward indefinitely.

I have one client who had about $100,000 in recognized net capital losses a few years ago, We are nibbling at that balance every year by offsetting any gains against it, and claiming the $3,000 per year until it is all used up.

But the $3,000 is just a reduction of otherwise taxable income, not a credit.

Mike (CPA Retired)
 
Gain or loss is based on the sale of stock (or it's becoming worthless). At that time you will have a capital gain or a capital loss. For items held less than a year the gain or loss is short term, for a year or longer it is long term.

On Schedule D you compute the Short and Long Terms items separately and then combine them. If the net loss is less than $3,000, you can apply the amount of loss against ordinary income. If the net loss is $3,000 or more you can use $3,000 to offset ordinary income and carry the unused portion forward indefinitely.

I have one client who had about $100,000 in recognized net capital losses a few years ago, We are nibbling at that balance every year by offsetting any gains against it, and claiming the $3,000 per year until it is all used up.

But the $3,000 is just a reduction of otherwise taxable income, not a credit.

Mike (CPA Retired)

Thank you for the very helpful explanation, Mike!
 
Gain or loss is based on the sale of stock (or it's becoming worthless). At that time you will have a capital gain or a capital loss. For items held less than a year the gain or loss is short term, for a year or longer it is long term.

On Schedule D you compute the Short and Long Terms items separately and then combine them. If the net loss is less than $3,000, you can apply the amount of loss against ordinary income. If the net loss is $3,000 or more you can use $3,000 to offset ordinary income and carry the unused portion forward indefinitely.

I have one client who had about $100,000 in recognized net capital losses a few years ago, We are nibbling at that balance every year by offsetting any gains against it, and claiming the $3,000 per year until it is all used up.

But the $3,000 is just a reduction of otherwise taxable income, not a credit.

Mike (CPA Retired)[/Q


Butting in to ask a related question, I have net capital losses from worksheet in 2007 but had no sales of stocks in 2008, 2009 and so did not fill out Schedule D, since I did not take the 3000 offset in those years do I lose that carry over or can I still use in the future against capital gains . Hope I explained well Thank you.
 
Butting in to ask a related question, I have net capital losses from worksheet in 2007 but had no sales of stocks in 2008, 2009 and so did not fill out Schedule D, since I did not take the 3000 offset in those years do I lose that carry over or can I still use in the future against capital gains . Hope I explained well Thank you.

You'll need professional advice here (I'm not a CPA), but I think this is how it will go:

You'll have to file amended returns for 2008, 2009, and 2010 (if you've already filed) and I think you'll have to do Schedule D on all returns to claim you carryover.

You might need to hurry since you only have until April 15 to do an amended return for 2008 and get a refund (http://www.irs.gov/taxtopics/tc308.html)...I read that you only have two years from the filing deadline to amend a return and obtain a refund. You could still amend the return to carry forward your losses, but if you amend after the two year deadline you forfeit the ability to get a refund for that tax year. But even if you miss the deadline, it could enable you to bring your capital losses forward to this year or get a 2009 refund.

This will be expensive with a CPA, but could be well worth it, depending on the size of your loss.
 
I agree with the PP. You have to file a schedule D for each year.

If you have been using a stand-alone computer program it should have the 1040-X, amended Return, on it. Otherwise I would go to a tax service and have them do amended Federal and State returns for you for each year. If, for example, you are in the 15% bracket that is a $450 per year refund from the Federal; obviously higher if you are in a higher bracket. And they will also pay you interest from the due date of each year's return (But this is a study in mixed emotions; the refund, of course is not taxable income, but the interest will be taxable on your 2011 return).

And the 2008 amended has be be mailed by April 18.
 







New Posts









Receive up to $1,000 in Onboard Credit and a Gift Basket!
That’s right — when you book your Disney Cruise with Dreams Unlimited Travel, you’ll receive incredible shipboard credits to spend during your vacation!
CLICK HERE














DIS Facebook DIS youtube DIS Instagram DIS Pinterest DIS Tiktok DIS Twitter

Back
Top