Capital vs Income losses question

Oct 26, 2020 Last reply: 5 years ago 1 Replies
J

This is not a political question



Regarding the extremely large loss that Trump declared in his IRS returns in earlier years. ($1 Billion?)



Just curious about the following:


  1. It appears that he lost his ?investment? so it appears that it is a capital loss not an income loss. If this is so, how come can it be written off against income of future years? Shouldn?t it be restricted to writing it off against future capital gains not income?


  1. Was he able to convert a capital loss into an income loss?

  2. Where (which line) and how in the IRS form 1040 did he enter this loss to offset against income?
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I

Because he qualifies as a real estate professional, many of his losses will be ordinary losses and not investment/capital losses for tax purposes. There are also many tax incentives for real estate investors/professionals that he may have been able to take advantage of. (Note that the previous three words are not meant to reflect my opinion whether his choices were appropriate or not.)

If the losses created a net operating loss, depending on the year when they occurred, he would have been able to carry them back 2-5 years and forward for up to 20 years, using the losses to offset income.

Ira Smilovitz, EA Leonia, NJ

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