Carry over losses


J

joe

Best way to ask is by scenario.

If lost 20,000 in 2000 you may deduct 3000 against ordinary
income then you carry over 17,000. into 2001 then again
deduct $3000 in 2001 carry over 14,000 into 2002 then
again 11000 into 2003.

Now say I have a gain of 10,000 from a stock sale long term
or short in 2003 (Keep in mind I have 11,000 carry over in
2003)

Will any tax on 10,000 profit be canceled out due to the
11,000 carry over lost? Or am I only allowed to apply 3000
from my carry over and apply it to my gain and pay tax on
only 7,000?

I Believe I will not have to pay tax on this gain due to my
loss carryover and also still subtract 3000 from my ordinary
income even though after I subtract my lost from my gain I
only have 1000 left.

I believe deducting from ordinary income is separate from
carry over lost vs gain in stocks. Am I correct?

is it true - If lost 20000 in year 2001 and gained 20000 in
2002 no tax will be due ????

Thanks in advance
 
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H

Herb Smith

joe said:
Best way to ask is by scenario.

If lost 20,000 in 2000 you may deduct 3000 against ordinary
income then you carry over 17,000. into 2001 then again
deduct $3000 in 2001 carry over 14,000 into 2002 then
again 11000 into 2003.

Now say I have a gain of 10,000 from a stock sale long term
or short in 2003 (Keep in mind I have 11,000 carry over in
2003)

Will any tax on 10,000 profit be canceled out due to the
11,000 carry over lost? Or am I only allowed to apply 3000
from my carry over and apply it to my gain and pay tax on
only 7,000?

I Believe I will not have to pay tax on this gain due to my
loss carryover and also still subtract 3000 from my ordinary
income even though after I subtract my lost from my gain I
only have 1000 left.

I believe deducting from ordinary income is separate from
carry over lost vs gain in stocks. Am I correct?

is it true - If lost 20000 in year 2001 and gained 20000 in
2002 no tax will be due ????
Correct on all counts, although if you only have $1000 of
carryover loss left you will only be able to offset $1000 of
ordinary income (not $3000).
 
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P

Phil Marti

joe said:
If lost 20,000 in 2000 you may deduct 3000 against ordinary
income then you carry over 17,000. into 2001 then again
deduct $3000 in 2001 carry over 14,000 into 2002
You left out a step. The $17,000 gets carried to your 2001
Schedule D. There it gets netted with all your 2001 gains
and losses, and if there's a net Schedule D loss, $3,000 is
used and the balance carried forward to 2002.

Thus, when you have a Schedule D gain it gets eaten up by
the carried forward loss.
 
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B

Bill

(e-mail address removed) (joe) posted:
Best way to ask is by scenario.
If lost 20,000 in 2000 you may deduct 3000
against ordinary income then you carry over
17,000. into 2001 then again deduct $3000 in
2001 carry over 14,000 into 2002 then again
11000 into 2003.
Now say I have a gain of 10,000 from a stock
sale long term or short in 2003 (Keep in mind I
have 11,000 carry over in 2003)
Will any tax on 10,000 profit be canceled out
due to the 11,000 carry over lost? Or am I only
allowed to apply 3000 from my carry over and
apply it to my gain and pay tax on only 7,000?
Yes. The entire 10,000 gain would be erased by the
carryover, leaving 1,000 to offset ordinary income.
I Believe I will not have to pay tax on this gain
due to my loss carryover and also still subtract
3000 from my ordinary income even though
after I subtract my lost from my gain I only
have 1000 left.
Wrong.

I believe deducting from ordinary income is
separate from carry over lost vs gain in stocks.
Am I correct?
No. Only, inasmuch as there are "leftover" capital losses.
is it true - If lost 20000 in year 2001 and
gained 20000 in 2002 no tax will be due ????
No, not quite. $3,000 of the 2001 loss would be used to
offset ordinary income, and 17,000 would be carried over --
leaving 3,000 of the 2002 gain to be taxed at cap gain rates
(depending, of course, on other activity on your 2002
return).

Bill
 
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N

Nan, EA in LA

The figuring is done on Schedule D.On D there is no "3000
per year limit" until the final bottom line is reached.
An $11,000 loss will eat up a $10,000 gain and you will have
$1,000 loss to apply against ordinary income. And that will
end the carryover.

Nan, EA in LA
 
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R

Rich Carreiro

joe said:
Best way to ask is by scenario.

If lost 20,000 in 2000 you may deduct 3000 against ordinary
income then you carry over 17,000. into 2001 then again
deduct $3000 in 2001 carry over 14,000 into 2002 then
again 11000 into 2003.

Now say I have a gain of 10,000 from a stock sale long term
or short in 2003 (Keep in mind I have 11,000 carry over in
2003)

Will any tax on 10,000 profit be canceled out due to the
11,000 carry over
Yes.

The $11,000 carryover will eat up the $10,000 gain,
leaving a $1,000 loss that can be taken against
ordinary income, finishing off the carryover.
 
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B

Barry Margolin

joe said:
Best way to ask is by scenario.

If lost 20,000 in 2000 you may deduct 3000 against ordinary
income then you carry over 17,000. into 2001 then again
deduct $3000 in 2001 carry over 14,000 into 2002 then
again 11000 into 2003.

Now say I have a gain of 10,000 from a stock sale long term
or short in 2003 (Keep in mind I have 11,000 carry over in
2003)

Will any tax on 10,000 profit be canceled out due to the
11,000 carry over lost? Or am I only allowed to apply 3000
from my carry over and apply it to my gain and pay tax on
only 7,000?

I Believe I will not have to pay tax on this gain due to my
loss carryover and also still subtract 3000 from my ordinary
income even though after I subtract my lost from my gain I
only have 1000 left.
No. First you net out the gains and losses, including any
excess losses carried from the previous year. After that,
if there's a net loss you can deduct up to 3,000 against
ordinary income. But you can't deduct more than the net
losses, so in your case you can deduct the 1,000 that's
left, and then you're even.
 
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