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Lou
Lou, Tax Preparer
Category: Tax
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Experience:  25+ yrs Experience Personal Income Taxes - Former DM for H&R Block in California
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I am doing my taes for 2002, 2003, 2004. I have $40,000 capital gains in 2002 and 2003.

Resolved Question:

Can I spread my capital loses form 2002 evenly over 2002 and 2003? In other words on my w-2 I show $40,000 capitol gains in 2002 and 2003 because the company i worked for granted me stock options. Privatley in 2002 (ETRADE) I traded stocks on the side on my own. In my Etrade account for 2002 I lost $65,000. Now Can I use $32,500 on my 2002 tax returnsand $32,500 on my 2003 tax returns or do I have to use $40,000 for my 2002 tax returns to cancel out the entire capitol gains I made for 2002 with my companys stock options? If I can evenly distribute the losses over "02 & "03' I won't owe anything to the government..Thanks...
Submitted: 5 years ago.
Category: Tax
Expert:  Lou replied 5 years ago.

Hello and thank you for contacting JustAnswer. We appreciate the opportunity to be of service to you.

 

Capital losses can be carried forward from one year to the next but only at a maximum of $3,000 per year

 

They can be carried over indefinitely until they are used up.

 

Customer: replied 5 years ago.
Let me re-explain my position. I know about the 3,000 each year going forard but in my case in 2002 I excersised and sold for a total profit $40,000 of options. Again this shows on my pay slip and W-2. In 2002 I also day traded on the side with Etrade. I lost $70,000. Now in 2003 I again excersised and sold $40,000 in options. This shows up on my pay check and W-2. So 2002 I lost $70,000 in my etrade account (capitol losses) also in 2002 my company allowed me to excersise and sell $40,000 in ISO Stock. In 2003 I again excersised and sold $40,000 in company ISO stock.

The question can I spread out my capitol losses in a way where I can write off $35,000 in 2002 and $35,000 in 2003 or do I have to write off $40,000 in 2002 and $30,000 in 2003? Understand that if I only use $35,000 write offs in 2002 it won't fully cover the $40,000 caitol gains I made on the ISO stock..

I hope I am being clear on my explanation..

2002-- capitol loss $70,000 my etrade account Can I spread this loss 1/2 for 2002 and 1/2 in 2003?
2002-- capitol gain ISO stock $40,000
2003-- capitol gain ISO stock $40,000
Customer: replied 5 years ago.
The maximum $3,000 is a captital loss write off for other income. I'm talking strictly about writing off capital gains for 2002 and 2003. You can;t tell me that I lost $70,000 and I can only writeoff $3,000 of my next year's capital gain of $40,000..Doesn't sound correct..Definitly not correct.Please review question and research before sending answer, repectfully.
Expert:  Lou replied 5 years ago.

 

Thanks for the clarification. The detail is helpful. I wish I could tell you that what you are describing would work but unfortunately it will not. The forms and instructions do not give you the opportunity to choose when or to what degree you can take your losses.

 

You can take all your losses up to your gains +$3,000 in losses. However once you use up your losses they are gone. You must take all losses up to gains on a year by year basis, you cannot choose to equalize your losses as you are describing.

 

Here is how it will work out:

 

2002-- capitol loss $70,000

 

2002-- capitol gain ISO stock $40,000 net loss $30,000 carried forward to 2003

2003-- capitol gain ISO stock $40,000 net gain $10,000

 

The $30,000 carry forward could be reduced by up to $3,000 to reduce other income for 2003. If that were to occur then you would have $27,000 to carry forward to 2003 and your net gain would be $13,000 in 2003.

 

I hope this clarifies my answer. If you have further questions on this topic be sure and get back to me.

 

Lou, Tax Preparer
Category: Tax
Satisfied Customers: 404
Experience: 25+ yrs Experience Personal Income Taxes - Former DM for H&R Block in California
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Lou
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25+ yrs Experience Personal Income Taxes - Former DM for H&R Block in California