Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
Short-term & long-term gains & losses on Sched. AI of Form 2210.
Posted by: wanttoknow, June 13, 2017 06:29AM
I am filling out Schedule AI of Form 2210 (annualized income installment method).

For all of 2016 I had both a long-term capital gain and a net short-term capital gain, and the latter is treated as ordinary income.

However, for Jan.-March 2016 I had a net short-term loss (less than $3,000) and a net long-term gain, with the gain exceeding the loss. On Schedule AI should I deduct the short-term loss from ordinary income or should I net it against the long-term gain?

I.e. should I treat the net short-term & long-term totals for any period less than one year the same as if that period was the entire year, or should I treat them the same as they end up being treated for the entire year?

Re: Short-term & long-term gains & losses on Sched. AI of Form 2210.
Posted by: kaneohe, June 13, 2017 06:41PM
I thought Alan S. had already warned you about not paying in equal installments and bringing the AI punishment upon yourself :)
[fairmark.com]

I don't know the answer to your question but it seems like you are plowing new ground if you don't net ST/LT first. Yes , for yr end, ST and LT go their separate ways but that's because they are both gains. What if you had in Q1 a ST gain & LT loss? Wouldn't you want to net them first?

Re: Short-term & long-term gains & losses on Sched. AI of Form 2210.
Posted by: wanttoknow, June 13, 2017 08:04PM
kaneohe,

My Sept-Dec. income is so hugely more than my Jan.-Aug. income that I feel it is worth it to not rely on the safe harbor.

Your second paragraph is arguing for the principle of treating net short-term & long-term totals for any period less than one year the same as if that period was the entire year.

However, Alan’s general advice was “The worksheet deals WHEN the income is realized as a portion of the full year, not how taxes would be determined if you died early in the year and income then went to your estate.”— i.e., the principle that net short-term & long-term totals for any period less than one year should be treated the same as they end up being treated for the entire year.

If I don’t get any answer to my question, I will just do for any period less than one year whatever is less tax-favorable, to be on the safe side.

Re: Short-term & long-term gains & losses on Sched. AI of Form 2210.
Posted by: wanttoknow, June 13, 2017 11:36PM
I have come across the answer to this, embedded in the Pub. 505 Qualified Dividends and Capital Gain Tax Worksheet for Schedule AI. It is that the net short-term & long-term totals for any period less than one year are to be treated the same as if that period was the entire year--surprising given Alan's guidance.

An interesting thing about the Pub 505 version of the worksheet is that it lacks the lines for taxing at 20% the qualified income that brings total taxable income over a certain threshold. Apparently the I.R.S. just forgot about this when the 20% rate was instituted.

Re: Short-term & long-term gains & losses on Sched. AI of Form 2210.
Posted by: kaneohe, June 14, 2017 01:55AM
I ran across that wksht last night but didn't think to mention it cuz it looked so similar to the normal QDIV/LTCG wksht....."the way everybody does it".
(I did miss that part about the 20% bracket.....good catch . Maybe IRS wanted to give you a break)

Glad you can sleep tonight!



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