Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Capital gain tax questions
Old 10-21-2004, 05:37 AM   #1
Full time employment: Posting here.
 
Join Date: Jan 2004
Posts: 844
Capital gain tax questions

Question for you tax savy folks.....

1. What happens when you are carrying forward a short-term loss, and then the next year you have some short-term gains and some long-term gains?

For example, if you have a $100,000 carryforward ST loss and then you make $20,000 in st gains and $30K in LT gains.

The $20K ST gain obviously is offset by the ST loss, but can you offset the LT gain with the ST loss?

__________________

__________________
farmerEd is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Capital gain tax questions
Old 10-21-2004, 06:28 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: Capital gain tax questions

Usually, what you are required to do is offset the LT gain with any loss carryover, then offset any ST gains with any remaining loss carryovers. This makes things come out in the gummint's favor.

So yes, you can offset LT gains with ST losses.
__________________

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 06:42 AM   #3
Full time employment: Posting here.
 
Join Date: Jan 2004
Posts: 844
Re: Capital gain tax questions

OK, another question. I knew I had two but couldn't remember the second....

I am still carrying forward some st losses from prior years...this year I had a st gain that used up about 15% of my losses...so I applied the st loss to the st gain and carried the rest of the loss forward...BUT, even if I didn't apply the loss to the gain, my tax liability would still have been zero (high property taxes and 4 kids sets the threshold pretty high), so in otherwords, I would have prefered to carry the FULL loss forward, and not applied any of it to my gain...is that possible? I couldn't find anyway to do it in turbo-tax, so I went ahead and let it apply the loss to the gain.

Is it possible to not use a loss to offset a gain? in my situtation, I would have much prefered to carry the loss to a future year when it may have done me some good....?
__________________
farmerEd is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 07:48 AM   #4
Recycles dryer sheets
 
Join Date: Jan 2004
Posts: 159
Re: Capital gain tax questions

Is it possible to not use a loss to offset a gain?

Nope. At least, I'm pretty sure the answer is "nope".

malakito
__________________
malakito is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 07:59 AM   #5
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,620
Re: Capital gain tax questions

FarmerEd,

This sounds like a great opportunity to convert a portion of a conventional IRA to a Roth IRA. Cap losses may be painful, but they sure can hide a lot of other gains.

I suspect that storing cap losses in a "cookie jar" falls under the heading of "too good to be true". Maybe you could harvest some cap gains in anticipation of the stock market's post-election meltdown when we realize that we've elected a real loser. (Take your pick, but either way the "loser" outcome is unchanged.)

But your question is perfect for the financial managers that post at FundAlarm-- http://www.fundalarm.com/wwwboard/wwwboard.html . Bob C, in particular, might have an answer with a tax-code reference...
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 08:50 AM   #6
Recycles dryer sheets
 
Join Date: Aug 2003
Posts: 474
Re: Capital gain tax questions

I'm no tax expert, but I did muddle through my own taxes last year, and from what I could figure out first you apply ST loss to ST gain, and LT loss to LT gain. Then, if there are any gains and losses leftover you apply ST losses to LT gains, or LT losses to ST gains. You cannot chose to hold losses for future years.
__________________
bongo2 is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 10:00 AM   #7
 
Posts: n/a
Re: Capital gain tax questions

One good thing is that if you don't have gains to offset, the caryforward can offset $3K of ordinary income - even if the original loss was long-term...
__________________
  Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 01:32 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Capital gain tax questions

Quote:
This sounds like a great opportunity to convert a portion of a conventional IRA to a Roth IRA. Cap losses may be painful, but they sure can hide a lot of other gains.
Capital losses can be used to offset a Roth conversion?

Are you sure?

Since I have a good pile of capital losses, this would make me very, very happy...

Let me know what you know...i'm off to research...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 01:45 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Capital gain tax questions

Unfortunately no...its treated as income, not as a gain
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 02:16 PM   #10
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: Capital gain tax questions

Quote:
Question for you tax savy folks.....

1. *What happens when you are carrying forward a short-term loss, and then the next year you have some short-term gains and some long-term gains?

For example, if you have a $100,000 carryforward ST loss and then you make $20,000 in st gains and $30K in LT gains.

The $20K ST gain obviously is offset by the ST loss, but can you offset the LT gain with the ST loss?
Yes, you can offset LT gain with ST loss.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 02:20 PM   #11
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: Capital gain tax questions

Quote:
OK, another question. I knew I had two but couldn't remember the second....

I am still carrying forward some st losses from prior years...this year I had a st gain that used up about 15% of my losses...so I applied the st loss to the st gain and carried the rest of the loss forward...BUT, even if I didn't apply the loss to the gain, my tax liability would still have been zero (high property taxes and 4 kids sets the threshold pretty high), so in otherwords, I would have prefered to carry the FULL loss forward, and not applied any of it to my gain...is that possible? I couldn't find anyway to do it in turbo-tax, so I went ahead and let it apply the loss to the gain.

Is it possible to not use a loss to offset a gain? in my situtation, I would have much prefered to carry the loss to a future year when it may have done me some good....?
Yes, it's possible to be in a situation where the full loss is carried over into next year. If you don't know how this works, I would suggest you have your tax return prepared by a local CPA.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 02:29 PM   #12
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: Capital gain tax questions

Quote:
Unfortunately no...its treated as income, not as a gain
TH, I'm confused. Are you saying you can't offset taxable income from a conversion to a Roth IRA with capital losses?
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 02:49 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Capital gain tax questions

That appears to be the case, except for the $3000 limit for losses applied to income each year. Every document I read referred to the conversion as being treated as ordinary income, not as any kind of capital gain.

Just to recap on the gains/losses rules (as I understand them):

Any ST losses in the current year or carried over are applied first to ST gains.

Any LT losses in the current year or carried over are applied first to LT gains.

Once that is complete, any remaining ST or LT losses can be used to offset the other.

After that, a max of $3000 is applied to ordinary income.

I dont believe you have the option to not apply losses when you have them. At least turbotax gives you no choice when it calculates. I havent looked into that in detail though.

Example:

You have 10k in ST losses and 5k in LT losses.

In the current tax year you have $15k in ST gains and no LT gains.

You apply the 10k in ST losses to the ST gains, and then you may apply the 5k in LT losses to the ST gains.

Example 2:

You have 10k in ST losses and 5k in LT losses.

In the current year you have 5k in ST gains and 10k in LT gains.

You apply 5k of st losses to the 5k in st gains, 5k of lt losses towards the 10k in lt gains. This leaves you with 5k in st losses and 5k in lt gains. You apply the 5k in st losses to the 5k in lt gains.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 03:21 PM   #14
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: Capital gain tax questions

Quote:
That appears to be the case, except for the $3000 limit for losses applied to income each year.
Ok, so you can offset a conversion of at least $3000 taxable a year with capital losses.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 03:27 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Capital gain tax questions

Yep.

I was getting excited about it because I've got six figures in losses and could have converted almost a third of my ira into a roth in one year if you could use capital losses to offset the conversion.

No such luck...it appears.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 03:33 PM   #16
 
Posts: n/a
Re: Capital gain tax questions

This is not an answer to the post at all, but only a comment.

Why do you guys even bother trying to figure out your own taxes? - Do you fill your own teeth or do you go to a Dentist?

I pay my accountant about $150 a year to answer my questions and file my returns every year. He has saved me more money than his fees over the last 20 years. Plus I don't have to think about it and can go fishing.

Think about it. Reading about and studing taxes is work and you're amateurs. Plus the laws change every year and who wants to keep up with that?

You're retired ! Would'nt you rather be sitting on a beach drinking Mai Tais or looking at my Fishing Pictures?
__________________
  Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 03:53 PM   #17
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: Capital gain tax questions

Quote:
Yep.

I was getting excited about it because I've got six figures in losses.
Ahhhh, now this explains why you are so pessimistic of the stock market. I hope you can recover some of those losses with some tax benefits at least.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 04:01 PM   #18
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: Capital gain tax questions

Quote:
This is not an answer to the post at all, but only a comment.

Why do you guys even bother trying to figure out your own taxes? *- Do you fill your own teeth or do you go to a Dentist?

I pay my accountant about $150 a year to answer my questions and file my returns every year. He has saved me more money than his fees over the last 20 years. Plus I don't have to think about it and can go fishing.

Think about it. Reading about and studing taxes is work and you're amateurs. Plus the laws change every year and who wants to keep up with that?

You're retired ! Would'nt you rather be sitting on a beach drinking Mai Tais or looking at my Fishing Pictures?
I agree 100%. People here are struggling to figure out what it takes a CPA years to understand. Put the tax preparation fees in your budgets and do something more fun with your time.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 04:07 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Capital gain tax questions

Eh, I got out in 1/2000 and was trying to buy dips when the nasdaq hit 3000 and then when it hit 2000. Obviously a mistake in retrospect.

The good news is the loss stockpile enables me to avoid paying any taxes at all for a long time. Right now I'm enjoying the dividend tax break and saving the capital losses for later.

Cut-Throat...I do my own taxes for the same reason I change my own oil. I know the job is done right and I know its been done thoroughly. I can employ a piece of software that I get for free that is updated every day with the latest in tax law. Knowing the implications of taxable events helps me make better decisions in investing. I can look at things 5 different ways and see the effects.

I discovered 5 years ago that jiffy-lube hadnt greased the front end on my truck for 5 years running. I was wondering why the steering was a little stiff. When I called them, they said their computer said my truck had no grease fittings. I suppose looking at the front end while waiting for the oil to drain and seeing the 5 obvious zerks was a little too complicated for them.

Further, I have a friend whose ex-husband does taxes. Prides himself on pushing every line and dipping into every interpretable deduction. Looks forward to audits to try and prove his skills. I'd rather pay a little extra in tax, follow the rules, and avoid that scenario. I also had my taxes done by a H&R Block about 15 years ago. When I got home and reviewed the paperwork I found a couple of deductions they hadnt taken, and a mistake on one calculation series.

Oil filters are cheap, so is turbotax...

But whatever works for you, do it!
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Capital gain tax questions
Old 10-21-2004, 04:08 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Capital gain tax questions

Quote:

I agree 100%. People here are struggling to figure out what it takes a CPA years to understand. Put the tax preparation fees in your budgets and do something more fun with your time.

Silly question for y'all. Why do we read books, go through a lot of trouble and invest our own money in index funds when there are perfectly good financial planners willing to offload all that hard work for just a percent or two of our money every year. Seems cheap to avoid learning all that investing stuff... :P
__________________

__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Capital Losses and AMT Delawaredave FIRE and Money 2 02-20-2007 05:32 AM
capital gains tax question just_hatched FIRE and Money 5 01-31-2006 11:07 PM
When to pay capital gains for greater diversification bamsphd FIRE and Money 21 11-29-2005 01:15 PM
Dumb tax questions cute fuzzy bunny FIRE and Money 10 05-11-2005 12:47 PM
Bush floats a national sales tax dex FIRE and Money 22 08-17-2004 08:15 AM

 

 
All times are GMT -6. The time now is 07:44 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.