:taxes question capital losses:

[darkod]

Hello,

I had a rough year last year and lost about $7500 trading the Eminis. I've got a regular job, so I know I can't apply for trader status...but how will this work?

It looks like it split into $4500 long term capital losses, and $3000 short term capital losses (60/40 rule).

Will I be able to apply $3000 short term losses and $3000 long term losses this year? Or is the rule that I can only apply one of the $3000 losses this year and carry the other $4500 over the next two years ($3000 next year, $1500 the following year).

Is there anyway to apply the whole $7500 loss just for this year? That would be nice THanks in advance@

 

[gnome]

Quote from darkod:

Hello,

I had a rough year last year and lost about $7500 trading the Eminis. I've got a regular job, so I know I can't apply for trader status...but how will this work?

It looks like it split into $4500 long term capital losses, and $3000 short term capital losses (60/40 rule).

Will I be able to apply $3000 short term losses and $3000 long term losses this year? Or is the rule that I can only apply one of the $3000 losses this year and carry the other $4500 over the next two years ($3000 next year, $1500 the following year).

Is there anyway to apply the whole $7500 loss just for this year? That would be nice THanks in advance@

In a word, no. If you're writing off capital losses against earned income, it makes nor dif whether short/long term loss.

Presuming you "recover" in '03, I don't THINK it will make any difference offsetting this year's gains vs. loss carry forwards.

For the excess gains, better consult your tax preparer.

 

[Free Thinker]

Quote from darkod:

Hello,

I had a rough year last year and lost about $7500 trading the Eminis. I've got a regular job, so I know I can't apply for trader status...but how will this work?

It looks like it split into $4500 long term capital losses, and $3000 short term capital losses (60/40 rule).

Will I be able to apply $3000 short term losses and $3000 long term losses this year? Or is the rule that I can only apply one of the $3000 losses this year and carry the other $4500 over the next two years ($3000 next year, $1500 the following year).

Is there anyway to apply the whole $7500 loss just for this year? That would be nice THanks in advance@

unless you have other capital gains you can only use 3000 per year total against wages and carry the rest forward.

 

[omcate]

Quote from darkod:

Hello,

I had a rough year last year and lost about $7500 trading the Eminis. I've got a regular job, so I know I can't apply for trader status...but how will this work?

It looks like it split into $4500 long term capital losses, and $3000 short term capital losses (60/40 rule).

Will I be able to apply $3000 short term losses and $3000 long term losses this year? Or is the rule that I can only apply one of the $3000 losses this year and carry the other $4500 over the next two years ($3000 next year, $1500 the following year).

Is there anyway to apply the whole $7500 loss just for this year? That would be nice THanks in advance@

For your Information:

Bush has spoken about raising the maximum capital-loss deduction. An investor can use capital losses to offset capital gains, and if there is an excess of the losses, can now deduct up to $3,000 from ordinary income. Any remaining losses can be carried over, to generate $3,000 deductions in future years.

The House Ways and Means Committee early in October cleared a bill to raise that annual limit to $8,250. But the bill was never passed, and it is not clear if such a provision would be in a new tax bill next year.

Such a provision would meet at least some opposition on Wall Street out of fear that it would encourage the selling of stocks at a time when the markets are already shaky:

http://www.taxpolicycenter.org/news/dividends.cfm

 

[GD2KNO]

The tax laws (are not laws, but that's another subject) are not black and white and open to a lot of "interpretation". If you spent a reasonable amount of time trading the emini's and are continuing to do so there is no reason you cannot claim your trading as a "business" and not only take the losses, but also expenses related to your trading business.

Worst case scenario they audit you, unlikely if file extensions and don't file until 10/15. Even if audited and they refuse to allow the trading as a "business" you are working to establish so you can leave your job, then you are only liable for a 10% penalty on the amount of tax savings they disallow.

Of course, following this course of action takes some courage, but so does trading.