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Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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accounting

Customer Question

can i write off real estate capitol gains against stock losses from aprevious year
Submitted: 11 years ago.
Category: Tax
Expert:  Christopher Phelps replied 11 years ago.

You may offset current year capital gains (including gains from the sale of real property) with other current year capital losses as well as with capital losses carried forward from the prior year. Generally, per Schedule D, you will net short-term gains and losses (including carryforwards) to determine a net short-term gain/loss figure. Then you will net long-term gains and losses (including caryforwards) to determine a net long-term gain/loss figure. Finally, you will combine the net short-term and long-term gain/loss figures to determine an overall net capital gain or loss..


Be careful to determine whether there is any depreciation recapture. If any part of your gain is considered to be depreciation required to be recaptured, it will be treated as ordinary income not eligible to be offset directly by cap loss carryforwards and subject to your highest marginal tax rate (not capital gain rates which max out at 15%).


If you ever depreciated the property using non-MACRS methods, then you potentially have depreciation recapture. Also, if as part of the sale you realized gains on the sale of tangible personal property (i.e. furniture, appliances, equipment, etc.) there may be depreciation recapture involved there as well.


Because it is impossible for me to identify and consider ALL the relevant facts, this advice is not intended or written to be used for the purpose of avoiding penalties, and cannot be used for that purpose.

Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: is it only the previous year ? can i go back a few years ?
Customer: replied 11 years ago.
how many years can i go back
Expert:  Christopher Phelps replied 11 years ago.

You may CARRY FORWARD capial losses to the next year and deduct to the extent you have capital gains plus $3,000. Thus, your capital losses will be reduced by at least $3,000 every year. You may not carry back losses ever.


For example: If you incur net capital losses of $5,000 in each year from 1999 to 2003 (i.e. $25,000 in total), you would carry forward $10,000 of losses into 2004 (i.e. because you deducted $3,000 in each year ($15,000 total) from 1999 to 2003).


With respect to your second question, if you had $1,000,000 in capital losses incurred in 1990 with no gains or losses since then, you would have deducted $3,000 each year and carry forward into 2005 a total of $955,000. Technically, it would take you more then 338 years to use up these losses at $3,000 a year. However, when you die these losses just disappear.


Because it is impossible for me to identify and consider ALL the relevant facts, this advice is not intended or written to be used for the purpose of avoiding penalties, and cannot be used for that purpose.

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