I have $300,000 in carry forward short term losses and $400,000 in long term carry forward losses. In 2010 I have had an extraordinary $600,000 long term gain. Assuming I have no other gains or losses in
2010, what will happen?I "think" I will owe no taxes, and will be left with $100,000 in short term loses to be carried forward. Is that correct?
(well, $97,000 in short term carry forward, and a $3,000 offset to other income...)
I think you've got it right.
Is there a distinction between long and short term when it comes to losses carried forward?
Um, yes. Short term is first used up against short term gains. And long term losses are used against long term gains. Then the net short term gans/losses and net long term gains/loses are combined.
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As long as his taxable income is above zero, I agree. Otherwise, he might not be using (all or part of) his $3k offset.
Good point.
I think it's not taxable income, though, but (AGI less deductions) that has to be above zero.
For federal purposes, you are correct.
Your state situation may be different. NJ allows neither a capital loss, nor a carryover. So in your case, your $700,000 loss in 2009 would simplyh result in a "zero" capital gains income, and your $600,000 gain in 2010 will result in $600,000 of capital gains income.
Where TI is above zero, so is AGI. It's when TI is mathematically less than zero that one has to look.
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