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Unfortunately no. Your lapsed life insurance policies should be reported as ordinary income as far as I know. I'm sure the Insurance Compan(y)/(ies) have already informed you of that? Your short-term capital loss may be used against capital gains and if not fully absorbed, the excess loss can only be used against ordinary income at the rate of $3,000. per year. I'm sure you know all that but there is no way to reclassify those two components so that they will offset.
Have you considered trying to have the Insurance Compan(y)(ies) re-instate a least a portion of the policies? If you were to pay down a portion of the policy loans and accumulated interest, perhaps you can get the polices re-instated. That would work to make a substantial reduction in the tax due on the lapsed polices.
Just checking in to see if I can assist you further.
I see that you have had a chance to view my last series of comments.
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Thanks very much, Steve G.