capital loss carry-forward

I think there was another post on this recently but I can't find it, so my apologies if this is rehashing a recent discussion.
I'm doing my son's taxes. He has about $150 in carry-forward losses from last year.
A transaction in his account this year generated a LT gain of about $250. His earned income for the year is about $2600. I claimed him as a dependent.
My tax program used the carry-forward from last year to wipe out $150 of the gain from the year, and showed $100 capital gain on line 13 of his 1040. He owes no Federal tax, and wouldn't even if he had the $250 in capital gains.
The worksheet in the program shows he now has no loss carry-forward.
Since the loss carry-forward did not generate any tax savings, shouldn't the loss carry over to next year?
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In article ,
Whether he has to file depends on his gross income, not just on the resuling gain.
And whether the loss was used up or not can be found by completing the capital gain loss carryforward worksheet.
I suspect no loss was used up but fill out the worksheet to be sure.
Reply to
Arthur Kamlet
That sounds correct. The loss carryover from 2009 goes to the 2010 Schedule D, where it's netted with 2010 transactions. The bottom line of the 2010 Schedule D is a gain, so there's no loss to carry forward from there. The fact that the loss didn't change his tax is irrelevant.
Phil Marti VITA/TCE Volunteer Clarksburg, MD
Reply to
Phil Marti
Much of the answer will depend on the Gross Sale Price reported on the 1099-B. Keep in mind that the IRS may NOT know what your son's basis was in that sale. They may ONLY get the sale price. If the sale price, plus his other income, pushes him OVER the filing limit then he MUST file a return, that is the only way the IRS will know he owes no tax. On the other hand, if the sale price plus his other income is still UNDER the income filing limit that he is not REQUIRED to file a return.
BUT be careful in choosing not to file, even if you're legally allowed to not file. The statute of limitations to assess tax on a return is THREE years from the date the return is filed. If you do not file for him the statute of limitations NEVER EVEN STARTS TO RUN.
I ALWAYS recommend that once anyone starts to file a return that they CONTINUE to file a return until they die, even if they don't have to. It locks the IRS into a 3 year window in which they have to do something or they lose the ability to assess additional taxes.
Gene E. Utterback, EA, RFC, ABA
Reply to
Gene E. Utterback, EA, RFC, AB

Although such may be preferred, I recommend that they keep filing until they've filed at least a couple of years that were not required due to the income threshold (assuming no carryforwards, etc.). That way, the last two (or few) returns the IRS has show no filing requirement.
However, if there's any carryforward of information, that's different. NOL's, capital losses, business use of home expenses/depreciation, passive losses, IRC 179 carryforwards, non-deducted IRA basis, etc., should have their respective forms filed for as long as they exist. In 1999, I had a private conversation with IRS speaker Andre Re (examination issues, IRS Tax Forums - Reno, NV) about the home office carryforward: If a taxpayer had a unused carryforward, ceased their home-based business, and some years later, opened a new home-based business, the unused carryforward would become available to the new business (and adminstratively, the IRS would probably deny it UNLESS there were a constant filing of 8829 to carry the unused expenses forward). The two businesses need not be the same activity, nor would the taxpayer need to have the same residence (assuming any gain on sale recognized after exclusion did not or would not wipe out the expense carried -- e.g. renters). Just remember - some carryforwards' statutes have results that Congress or the IRS may not have expected.
Reply to
D. Stussy
He is not required to file, but he had a small amount of both Fed and state tax withheld, so he has to file to get that back.
So it seems his carry-forward loss has now been consumed, to no benefit.
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