Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
Schedule D Carry Forward Loss Mandatory?
Posted by: etelle, April 10, 2017 02:37PM
I have a carry forward loss from a prior year.
I think I am required to apply this loss to a capital gain received this year, but I would like to verify that.
My 2016 income was considerably lower than what I will receive in 2018, so It would be nice if I could delay applying the loss until then.

Thanks.


Re: Schedule D Carry Forward Loss Mandatory?
Posted by: triad, April 10, 2017 04:48PM
You must use the carry forward.

If your income is less than the standard deduction (or less than your itemized deductions), you may find that you don't use it all in 2016.

Re: Schedule D Carry Forward Loss Mandatory?
Posted by: etelle, April 10, 2017 07:39PM
Thanks for confirming. I was expecting this response.

But, it doesn't seem fair to require that when the taxable income is below the threshold at which dividends and capital gains become taxable.

This year, our taxable income is below the threshold, so the loss carryover appears to be lost.

Re: Schedule D Carry Forward Loss Mandatory?
Posted by: kaneohe, April 10, 2017 08:30PM
I know this will be of little comfort but consider:
1) If you take a LTCG in this range, it is taxed at 0 which is an amazing break
2) If you only had a loss (w/o the gain) you would get to use it against income which is also remarkable considering 1)
so perhaps it is only fair that the balancing act occurs in your situation,unfortunately, when you have both.

Re: Schedule D Carry Forward Loss Mandatory?
Posted by: etelle, April 10, 2017 08:38PM
Not to beat a dead horse, but the idea of being able to take a loss and carry it forward is an attempt compensate for a loss. By losing this, the loss is really lost.

On the other hand, I had this same situation last year. So, it does give me some comfort to know that I handled it correctly.

But it seems ironic that in a few years, when I would like to have something to offset RMDs I will no longer have this carry forward loss.


Thanks again for your replies

Re: Schedule D Carry Forward Loss Mandatory?
Posted by: 47Percent, April 21, 2017 12:23AM

One way to handle this situation is to take some capital gains, preferably short-term, for either portfolio balancing or simply to bring up the cost basis. You can easily swap a mutual fund or ETF to essentially equivalent ones to get around the 30 day rule.

Even better strategy is to do a sizable ROTH conversion to get you over the threshold so that the loss can offset against "income" taxed at the full rate.

Unfortunately this will not help you this time as these things need to be done before the year end.

ROTH conversion is especially great for this tax optimization because you can do a higher amount and really fine tune the amount after the fact at tax filling time, and re-characterize just the right amount.




Re: Schedule D Carry Forward Loss Mandatory?
Posted by: etelle, April 21, 2017 01:51AM
Thanks for the good ideas.

As you said, I should have thought about this in 2016.

Re: Schedule D Carry Forward Loss Mandatory?
Posted by: Drewremedy, May 6, 2017 12:11PM
You may be able to generate some additional income in 2017 to make more efficient use of the carryforward ...



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