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.
"Geoff" wrote
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
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
snipped-for-privacy@yahoo.com (Geoff) posted:
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
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.
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
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.
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