long term versus short term capital losses...


G

Geoff

I will have a great deal of long term capital gains this
year. I need to raise some cash by selling off investments.
The only losses available to me are short term. Can I offset
long term capital gains with short term losses? Any
disadvantage to doing this? At the moment I have no short
term capital gains.

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P

Paul Thomas, CPA

Geoff said:
I will have a great deal of long term capital gains this
year. I need to raise some cash by selling off investments.
The only losses available to me are short term. Can I offset
long term capital gains with short term losses? Any
disadvantage to doing this? At the moment I have no short
term capital gains.
There is a pecking order for deducting capital losses, but
the net result is that any short term losses will reduce the
long-term gains. You'll see that when you work through
Schedule D.

--
Paul A. Thomas, CPA
Athens, Georgia

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
J

joetaxpayer

Geoff said:
I will have a great deal of long term capital gains this
year. I need to raise some cash by selling off investments.
The only losses available to me are short term. Can I offset
long term capital gains with short term losses? Any
disadvantage to doing this? At the moment I have no short
term capital gains.
Well, long term gains are only 15% (effectively up to 22% if
you are in AMT land), and the short term losses can
potentially offset ordinary income, up to $3,000. But if the
gains are large, the shifting around may not benefit you. So
you're probably ok to go. No other huge disadvantage I know
of.

JOE

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
B

Bill

(e-mail address removed) (Geoff) posted:
I will have a great deal of long term capital
gains this year. I need to raise some cash by
selling off investments. The only losses
available to me are short term. Can I offset
long term capital gains with short term losses?
Any disadvantage to doing this? At the
moment I have no short term capital gains.
Never fear. As you work your way through Schedule D, all
gains and losses -- whether Short- or Long-Term --
ultimately get joined together, and one gets subtracted from
the other, for that particular year. Of course, LT gains
are advantageously taxed, so it's preferable to have a
preponderance of those, as in your case.

However, if you have ST losses, this can be an excellent
time to _harvest_ them, since they can partially offset the
tax liability from the gains you are realizing when you sell
your LT successful investments. (If some are in issues
which you believe show long-term promise, remember you can
re-invest after 30+ days have elapsed, and establish a new
cost basis.)

For the remainder, at least you will benefit from the 15%
rate currently in effect for LT gains.

Bill

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
H

Herb Smith

Geoff said:
I will have a great deal of long term capital gains this
year. I need to raise some cash by selling off investments.
The only losses available to me are short term. Can I offset
long term capital gains with short term losses? Any
disadvantage to doing this? At the moment I have no short
term capital gains.
Have you read the Schedule D instructions?
First, you calculate and net short term gains and losses,
then do the same for long term gains and losses. If after
doing the above, you have short term losses and long term
gains, you can net them together. Same with short term gains
and long term losses.

If the result is a loss - either short or long term - you
can offset up to $3000 against ordinary income. Anything
beyond that is carried over to the following year(s), where
it is treated the same way.

Just follow the form line instructions and you will get the
correct result.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
S

Seth

Bill said:
However, if you have ST losses, this can be an excellent
time to _harvest_ them, since they can partially offset the
tax liability from the gains you are realizing when you sell
your LT successful investments.
Though if you expect short-term gains in the future, keeping
the losses available (even if they become long-term, they
might not) could be a better strategy.

Seth

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
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H

Herb Smith

Geoff said:
I will have a great deal of long term capital gains this
year. I need to raise some cash by selling off investments.
The only losses available to me are short term. Can I offset
long term capital gains with short term losses? Any
disadvantage to doing this? At the moment I have no short
term capital gains.
Have you read the Schedule D instructions?
First, you calculate and net short term gains and losses,
then do the same for long term gains and losses.

If after doing the above, you have short term losses and
long term gains, you can net them together. Same with short
term gains and long term losses.

If the result is a loss - either short or long term - you
can offset up to $3000 against ordinary income. Anything
beyond that is carried over to the following year(s), where
it is treated the same way.

Just follow the form line instructions and you will get the
correct result.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 

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