1040X for Schedule D carryover incorrectly filed in 2000

Math error. After your 2000 return you had a $10,000 capital loss carryover.

Legal error. You don't get a choice regarding when you use the carryover. Whether you traded or not during the ensuing years, if you had enough income from other sources you used the carryover as follows:

2001: $3,000 used, $7,000 remaining 2002: $3,000 used, $4,000 remaining 2003: $3,000 used, $1,000 remaining 2004: $1,000 used, zero remaining

It's too late to file amended returns for any of those years unless the original was filed less than 3 years ago (possible for a 2004 filed on extension).

Amend your 2006 to claim the loss and establish your carryover. If you don't the IRS is going to be after you for tax on the gross proceeds of the sale(s).

Correct

I want to hit the lottery. Neither of us is likely to succeed.

No. It's too late to change your 2000 return. Amend the 2006 reporting your 2006 sales, then proceed with the resulting carryover to 2007.

If during the intervening years since 2000 you had negative taxable income after applying that year's $3,000 carryover you might have more of the 2000 carryover left as of 2004, but it's too late to change the amount of the

2000 loss.

No, it isn't. It's too late to get a _refund_ for the amendment.

No. He can file, just not get a refund.

He's more likely.

He'll have to refile every year from 2000 on, using up $3,000 of the capital loss carryforward each year.

Seth

And Phil responds: "I want to hit the lottery. Neither of us is likely to succeed."

I think just the opposite. (No, Phil, you won't hit the lottery) I think that alphaga can change his returns, no matter how much time has passed. The three-year statute of limitations prohibits *getting a credit or refund* from amending a return. It does not/should not stop you from correcting mistakes on returns, especially when they affect your carryovers to subsequent years.

I didn't pay enough attention to alphaga's details to be able to tell him exactly what he can do about correcting the earlier year losses, but I'm pretty sure that he can amend "early* returns, and that he

*should* amend them, when the changes will affect - favorably affect - *later* returns. Be prepared, however, to defend the earlier years' returns, if the IRS challenges them!

Since it appears we've all done the same amount of research (none) I have no problem agreeing to a "why not?" approach to amending 2000, the only "closed" year in which the capital loss realized during the year was misstated. IRS accepts it or doesn't, and OP proceeds as he wishes.

I see no point to amending returns that didn't use the carryover if no refund for those years is possible because it's barred by statute. Seems to me that OP could just do a worksheet adjustment to the carryover for those years to carry him to the point that refunds from amended returns would be allowed.

I agree with Phil. The loss carryover (appears to be $10,000) from 2000 has been absorbed by 2001, 2002, 2003 and 2004. There is no need to amend those returns as the end result is no change to taxes paid. The OP starts with the 2006 loss. If 2006 did not include a $3000 loss, then 2006 should be amended to account for the $3000 loss and obtain a refund. Carryover loss to 2007 is $14,000.

| I think just the opposite. (No, Phil, you won't hit the lottery) I | think that alphaga can change his returns, no matter how much time has | passed. The three-year statute of limitations prohibits *getting a | credit or refund* from amending a return. It does not/should not stop | you from correcting mistakes on returns, especially when they affect | your carryovers to subsequent years. | | I didn't pay enough attention to alphaga's details to be able to tell | him exactly what he can do about correcting the earlier year losses, | but I'm pretty sure that he can amend "early* returns, and that he | *should* amend them, when the changes will affect - favorably affect - | *later* returns. Be prepared, however, to defend the earlier years' | returns, if the IRS challenges them!

What if amending a closed year would have a favorable effect on later returns but would result in a higher tax in the closed year?

Dan Lanciani ddl@danlan.*com

Since long term capital loss need to be entered on Schedule D, won't he have to file an amended 2001 return on order to carry over to 2002, etc., etc., until the present (if anything is left to carry over).

To me it boils down to a question of what establishes the carryover that goes on the current Schedule D. Is it the loss itself, with the annual application of it from the loss year to present, or is it the annual reporting of it on Schedule D?

Again noting that I haven't researched this, it seems to me that once the loss carryover is established and reported on Schedule D for the loss transaction year its future application is set. Thus, in a year in which there were no Schedule D transactions, the application of $3,000 to other income (and the corresponding reduction in carryover loss to the next year) happens whether it's reported on Schedule D or not. (The same would be true if there were Schedule D transactions.)

If the taxpayer neglected to take advantage of that $3,000 and the year in question is closed, I don't see the point of filing an amended return which can't claim a refund just to account for the carryover. You can do that on a piece of paper to come up with the amount to put on the Schedule D being filed or (timely) amended.

But didn't the OP say that "After having the 2000?s trades rechecked I have realized that I had lost $30,000 instead of $13,000 which had been reported to IRS." Some of these $30,000 of losses look like they should carryover to 2007 from 2000, even with "absorption" in the intervening years....

And also, I said he could and should refile - amend - his "intervening" year returns. Phil said he couldn't, which I disagree with. Whether he has to or not is still, I think, up in the air.

I think he should: otherwise, when his returns are examined, a Capital Loss Carryforward will "appear" out of thin air (that is, not on the previous year's return).

On the other hand, amending the last non-refundable year will mostly avoid that. (The amended return will have the sudden appearance, but the refund can't be made so it might not receive much scrutiny. Subsequent years will appear consistent.)

Seth

If amending a closed year results in a higher tax, it has to be paid (with interest and maybe penalties). The 3-year limitation is one-way.

Seth

That one I have researched, and you're flat-out wrong. If assessment is barred by statue IRS cannot assess even if you file an amended return. And if they cannot assess they cannot apply money to the account even if you pay. (You could always send it off to pay off the national debt.)

We had a discussion of the issue some time ago in this forum regarding amending an estate tax return after the assessment statute was closed.

Yes, I missed that fact. He should amend 2000 to reflect the correct loss and the correct loss carryforward to 2001 (appears to be 27000).

I see no need to amend the closed years of 2001 thru 2004. Those years just suck up $12,000 of the $27,000 loss. That leaves a $15000 loss carryforward to 2005. He should amend 2005 to take his $3000 loss, as that year is still open, and carryforward the remaining $12000 loss to 2006. He should amend 2006 to pick up his 17000 of losses, deduct $3000 and carryforward the remaining loss of $26000 to 2007.

Doesn't the statute start again from the filing of the amended return? That's what I would have thought, anyway, but I can see how it could be the way you describe it, too.

Stu

No. If the assessment statute is still open and an amended return is filed the statute is held open n days after the amended return filing (I don't know the exact number, but it's not a full 3 year assessment statute) to allow time for processing. If the amended return is filed after the assessment statute for the original has expired, there can be no further assessment.

Were you financially disabled from 2001? If so, the time to amend your return and get a refund is extended. Otherwise, you've forever lost 3k each year from 2001 to 2003, and maybe even 2004 (if you filed an extension for 2004 return it would be due 15 October 2005, and three years from that date is 15 October 2008, and that's 3.5 months away).

Search for "Financially disabled".

It is quite possible that the "intervening" years *don't* use up $3,000 per year of the capital loss carryover. It depends on what other taxable income is on those returns. If OP's taxable income is low enough for any of those years, he'll be entitled to *not* piss away $3,000 of the loss for that year, saving more of it for 2007, when it will help him.

OP, what's your taxable income for the years 2001 through 2005? Is it really low? Like, is that maybe why you didn't even claim the loss carryover in those years? Did you file returns for those years???

Does he have to take the 3k loss, then do a NOL carryforward or carryback?

It might make sense to amend 2004 if the person is a resident of California. They allow four years to file an amended return, so you can at least get back the California portion for that year, if not the federal. I don't know about other states.