Capital Loss Carryover & Death

Discussion in 'Tax' started by Ron Sheldon, Feb 9, 2006.

  1. Ron Sheldon

    Ron Sheldon Guest

    My father passed away in 2005 just before reaching 91 and
    I'm now preparing his 2005 income tax returns -- zero tax
    liability.

    My brother and I inherited his assets held in his brokerage
    account, which was registered Transfer on Death and had a
    value less than that necessary to require an Estate Tax
    return.

    When I prepared my father's 2005 income tax return, part of
    the Capital Loss Carryover offsets 2005 capital gains
    distributions and the $3,000 maximum offset on line 13, Form
    1040, but a substantial amount of prior years Capital Loss
    Carryover remains unused.

    Does this unused Capital Loss Carryover expire this year
    with my father's death or do my brother and I inherit the
    unused amount for use with our income taxes?

    In the unlikely event that my brother and I inherit the
    remaining unused Capital loss Carryover, please direct me to
    the IRS publication or other source where I can read more
    about this.

    Thank you,

    Ron Sheldon

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2006) - All rights reserved. >>
    << ======================================================= >>
     
    Ron Sheldon, Feb 9, 2006
    #1
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  2. "Ron Sheldon" <> wrote

    > My father passed away in 2005 just before reaching 91 and
    > I'm now preparing his 2005 income tax returns -- zero tax
    > liability.
    >
    > My brother and I inherited his assets held in his brokerage
    > account, which was registered Transfer on Death and had a
    > value less than that necessary to require an Estate Tax
    > return.
    >
    > When I prepared my father's 2005 income tax return, part of
    > the Capital Loss Carryover offsets 2005 capital gains
    > distributions and the $3,000 maximum offset on line 13, Form
    > 1040, but a substantial amount of prior years Capital Loss
    > Carryover remains unused.
    >
    > Does this unused Capital Loss Carryover expire this year
    > with my father's death or do my brother and I inherit the
    > unused amount for use with our income taxes?


    Capital losses are, unfortunately, a use-it or lose-it deal.
    They do not get inherited by you or your brother.

    --
    Paul Thomas, CPA


    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2006) - All rights reserved. >>
    << ======================================================= >>
     
    Paul Thomas, CPA, Feb 11, 2006
    #2
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  3. Ron Sheldon

    Guest

    Capital loss carry forward ceases on death.

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2006) - All rights reserved. >>
    << ======================================================= >>
     
    , Feb 11, 2006
    #3
  4. Ron Sheldon <> writes:

    Sorry for your loss :(.

    > Does this unused Capital Loss Carryover expire this year
    > with my father's death or do my brother and I inherit the
    > unused amount for use with our income taxes?


    A taxpayer's capital loss carryover expires when the
    taxpayer does. You can use the carryover on the
    decendent's final income tax return, but after
    that it goes "poof".

    Consider it the flip side of the basis reset on death.

    --
    Rich Carreiro

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2006) - All rights reserved. >>
    << ======================================================= >>
     
    Rich Carreiro, Feb 11, 2006
    #4
  5. Ron Sheldon

    Guest

    Ron Sheldon wrote:

    > When I prepared my father's 2005 income tax return, part of
    > the Capital Loss Carryover offsets 2005 capital gains
    > distributions and the $3,000 maximum offset on line 13, Form
    > 1040, but a substantial amount of prior years Capital Loss
    > Carryover remains unused.
    >
    > Does this unused Capital Loss Carryover expire this year
    > with my father's death or do my brother and I inherit the
    > unused amount for use with our income taxes?


    Unfortunately, capital loss carryovers disappear when
    someone dies. Any excess amounts that cannot be used on his
    final tax return are lost. See Revenue Ruling 74-175.

    --Chris Ballard

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2006) - All rights reserved. >>
    << ======================================================= >>
     
    , Feb 11, 2006
    #5
  6. wrote:

    > Capital loss carry forward ceases on death.


    Please allow me to put a different twist on this.

    A married couple, who file MFJ, have separate securities
    portfolios, each in a revocable trust. Their estates are
    willed each to the other. One of them, whose portfolio has
    a carry forward loss, dies. Does the carry forward cease, or
    does it survive due to the MFJ factor?

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2006) - All rights reserved. >>
    << ======================================================= >>
     
    William Brenner, Feb 14, 2006
    #6
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