My son has some capital losses when he moved from NY to MA. My accountant at the time said he could use them should he ever move back to NY. He has since moved to CA and is now in IL. He has just been offered a job in NY, but will remain in IL. I am guessing he would have to file a NY tax return. Although any capital gains would be in IL, would he be able to use $3,000 of the old capital gains against his NY income?
Maybe I am wholly confused about this. If so, how would it work?
Getting no replies, I thought maybe I wasn't clear.
My son lives in Illinois and will get a job telecommuting with a company in New York.
He lived in NY in 2007 and had capital losses he couldn't use. He carried them forward on his federal return, but my accountant said the NY losses were useless unless he eventually returned to NY.
I presume he will have to file a NY return as he will have NY income. Can he use his 2007 capital losses against his new NY employment income?
I have no idea what this "accountant" meant. If your son had a capital loss carryforward on his federal return and he hasn't used it up yet, the carryforward will still be available to use against NY income if he files a NY tax return. If the loss has been used up on the federal return, there is nothing left to be used in NY.
Your son should be aware that NY takes an aggressive approach to taxation. If it deems that your son is working from IL for his convenience, and not the needs of his employer, his earnings will be subject to NY taxation.
Ira Smilovitz
As I understand it (which may mean very little), even if you use up capital losses on your federal return, they are still available to use on the NY return if they have not yet been used up there. And they are not available to use on another state's tax return, since they were never generated in that state in the first place.
Is this not the case?
He wants to live in IL and his employer doesn't care where he lives.
He used up all the carry forward against Federal income in 2009, but never used it against state income. The accountant said that since the loss was on a NYS return, it could only be carried forward to a NYS return sometime in the future. I take it my accountant was wrong?
You may be able to carryforward an unused loss for a future return to residency in some state (I doubt it), but I don't see anything in the NY tax code that allows it. NY starts with the federal AGI and then makes adjustments. For a list of the allowable adjustments, see the instructions for Form IT-225.
You are correct that he probably couldn't use the capital loss carryforward in the next state he moved to. The states are free to set their own rules for what income is taxed.
Ira Smilovitz
If he's living in IL by his choice and not the necessity of the employer, he will be subject to NY nonresident income tax.
As to the capital loss carryforward, the exact words the accountant used are important. I suspect that what the accountant said/meant was that the capital loss couldn't be used on another state's income tax return, but if your son returned to NY before the loss was used up at the federal level, any remaining NY-generated federal carryforward could be used on the NY return.
Ira Smilovitz
So, I suppose the taxpayer should have filed NY nonresident tax returns, claiming only the capital loss deduction, leading to a NOL which could be carried forward for NY purposes?
That wouldn't have worked because a non-business capital loss can't create an NOL. Bottom line is that when he moved out of state, he lost the capital loss deduction at the state level. If the loss had been large enough so that he moved back to MY before it was exhausted at the federal level, then, and only then, would he have a carryforward for NY purposes.
Ira Smilovitz
Interesting. Do you know how this works for California instead of NY?
CA has you calculate your carryforward as if you had been a CA resident. Therefore, unless some part of your capital loss carryforward on the federal return does not conform to CA law (very unlikely), the carryforward loss on the federal return gets posted to your CA return. In the most simplified case, a loss on the sale of common stock..... the federal loss goes on your CA return even if the loss originated at the time you were a nonresident of CA.
and what about unused capital loss carryforwards in years you are not filing CA taxes. Do they get "wasted" if used on Federal and not in CA?
========================================= MODERATOR'S COMMENT: Please trim out the parts of the prior post that are unnecessary to putting your comment into context.
"taxed and spent" wrote in message news:mlik5s$23i$ snipped-for-privacy@news.mixmin.net... ... and what about unused capital loss carryforwards in years you are not filing CA taxes. Do they get "wasted" if used on Federal and not in CA? ==== The instructions for California state that during a period of nonresidency, transactions have to be restated as if all prior years were non-resident years. This means that you will only get a carry forward based on transactions recognized by California upon nonresidents. That generally includes property sold within the state, partnership interests, etc., i.e. things that can be SOURCED to California. Losses from transactions which are sourced outside of California, or sourced to California only on account of residency will not be allowed during that period. These rules are complicated (and in my opinion, an absolute mess), so one should refer to the publication on the matter - especially FTB Pub. 1100 and the 540NR series instructions.
If you move into CA with capital loss carryforwards on your federal return, you must restate the carryforward losses from the prior year as if you had been a CA resident at that time. This is just a what-if calculation that does not create amended returns. See FTB Pub 1100 for examples.
Almost completely correct. If either there is a difference between Federal and CA law in calculating the capital gain (unlikely, as Alan noted) OR if you have negative income either as calculated under California law or under Federal law, causing some of the $3,000 loss claimed not to be reduced from the carryover, is there a difference in carryover. In most cases, the California carryover would be less than the Federal carryover, as the CA standard deduction is smaller than the Federal standard deduction, and CA itemized deductions do not include state or foreign taxes.
Although, on a CA return, you report Federal amounts and the differences, you often need calculate the amounts separately under CA law, using schedule CA to report the differences. Capital loss carryovers are usually the same, but NOL carryovers can be completely different as there have been a number of suspensions.
-- Arthur Rubin, CRTP, AFSP Brea, CA
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.