Yet another tax question

I

illiquid

Say you had 40k of short-term losses in '02 to carry forward, and for 03 you have 100k of futures gains.

Can you split the 100k into 60k long-term, 40k short-term and then cancel out the 40/40, so only pay 15% on 60k? Or do you have to deduct the 40k of losses off the top and then split the remaining 60k of capital gains 60/40 (36k long term, 24k short)?
 
It is my understanding (I am not a CPA) that unless you file as marked-to-market, you can only carry forward a max of 3K per year on your 2002 losses, for as many years as it takes to reach your 40K.
 
Quote from illiquid:

Say you had 40k of short-term losses in '02 to carry forward, and for 03 you have 100k of futures gains.

Can you split the 100k into 60k long-term, 40k short-term and then cancel out the 40/40, so only pay 15% on 60k? Or do you have to deduct the 40k of losses off the top and then split the remaining 60k of capital gains 60/40 (36k long term, 24k short)?
More...


You offset the short-term capital gain with the short-term capital gain first. In the above example, I *** THINK *** you only pay tax on the long-term capital gain:

Capital losses are used first to offset capital gains. If there are no capital gains, or if the capital losses are larger than the capital gains, you can deduct the capital loss against your other income — up to a limit of $3,000 in one year. If your overall capital loss is more than $3,000, the excess carries over to the next year. In other words, you treat the extra portion as if it were an additional capital loss in the following year.

http://www.fairmark.com/capgain/capgain.htm

However, you may like to consult a tax expert, or post the above question in a message board that is devoted to tax issues:

http://www.fairmark.com/messages.htm

:p
 
I agree with the answer posted by “omcate.” Here’s the way the rules work: The $40k of short-term capital loss (STCL) in 2002 first offsets short-term capital gain (STCG) in 2003. If there is a net STCL remaining—and there would not be in your hypothetical—that remaining STCL first offsets net long-term capital gain (LTCG), and then up to $3k of ordinary income.

Since the $40k STCG from 2003 was fully offset by the $40k STCL carryforward from 2002, that leaves the $60k LTCG from 2003 to be taxed. It will be taxed at a maximum rate of 15%, assuming it was recognized after May 5, 2003. If it was recognized before that date, the tax rate would be 20%.
 
Don't forget, if you had an additional unused carried forward cap loss from prior years over the 40K that you could claim an additional 3K in Capital loss after the netting of ST w/ ST and LT w/ LT as long as you weren't an MTM filer.

om got the procedure correct......

Later,

Crackedback, CPA
 
illiquid - Im probably the only one on this board that gets the Joy Division.

I always bring in the New Year with Joy Divisions "Ceremony."

Listening to it right now.

Best,


Mike
 
True. but the New Order version is also fantastic.

Got to see them play it live at the Moby Area 1 festivle a couple of years ago. Fantastic. They opened the show with "Atmosphere" and it just took off from there.
 
Quote from jwishcamper:

I agree with the answer posted by “omcate.” Here’s the way the rules work: The $40k of short-term capital loss (STCL) in 2002 first offsets short-term capital gain (STCG) in 2003. If there is a net STCL remaining—and there would not be in your hypothetical—that remaining STCL first offsets net long-term capital gain (LTCG), and then up to $3k of ordinary income.

Since the $40k STCG from 2003 was fully offset by the $40k STCL carryforward from 2002, that leaves the $60k LTCG from 2003 to be taxed. It will be taxed at a maximum rate of 15%, assuming it was recognized after May 5, 2003. If it was recognized before that date, the tax rate would be 20%.
More...


Joe, what about this situation: Short term capital losses in 2000. 3K of that was applied against earned income in 2001 and again in 2002, but there still remained a capital loss carryover "balance" from 2000 that was not used. (None of the carryover was used to offset capital gains in either 2001 or 2002). Now...can that remaining loss from 2000 be applied to help offset short term capital gains in 2003? Thanks.
 
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