As I understand it... If I have $100,000 in capital losses this year I can apply $3,000 against other income and carry $97,000 forward. If I have a gain of $20,000 next year, I apply $20,000 against the gain, $3,000 against other income, and carry $74,000 to the next year.
Is that about right? Does it matter whether the $100,000 loss or the $20,000 gain are long or short term?
By George, I think you've got it!
The loss carry forward is allocated to short term and long term (and could just be one of those) using the worksheet provided to calculate the loss carryforward.
Then the short term gains and losses are combined. And the long term gains and losses are combined. Then the net short term and net long term figures are combined.
If the result is a loss, the maximum of 3000 loss goes to form 1040 line 13. There it reduces taxable income. Chances are the remaining loss is carried forward.
But there are situations where the capital loss worksheet will show you that the carryforward loss has not been reduced by the full 3000 amount even though 3000 loss transferred to form 1040 line 13.
That happens, for example, when the itemized or standard deduction exceeds adjusted gross income.
Doesn't the gain over $3000 have to be a capital gain to be offset against capital losses?
Stu
First, yes. Then on to page one of 1040.
ChEAr$, Harlan
Sure. Assumed in my answer. Didn't you know what I was thinking :^)
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