To better understand the rules for offsetting capital losses

To better understand the rules for offsetting capital losses and how to treat capital losses carried forward, analyze the following data for an unmarried individua for the period 2014 through 2017. No capital loss carryforwards are included in the figures Requirement For each year, determine AGI and the capital losses to be carried forward to a later tax year. (If a box is not used in the table leave the box empty, do not enter a zero. Enter loss amounts as a positive number.) 2014 2015 2016 2017 AGI (excluding property ransactions STCG STCL LTCG LTCL AGI (including property S 54,000 64,000 S 74,000 S 84,000 3,250 11,000 7,000 6,500 6,500 750 12,000 22,000 4,500 3,000 5,700 500 10,000 6,000 8,000 3,500 S 51,000$ 61,000 $ 71,000 S 81,000 transactions STCL to be carried forward TCL to be carried forward 4,250 5,500 800 6,300

Solution

The numbers $5,500 ; $800 and $6,300 are arrived as follows:

In the year 2015:

STCG after setting off STCL of 2015 and 2014 is $1,500;

LTCL is $22,000 and LTCG is $12,000 only, there is shortage of $10,000 to set off LTCL, so STCG can be used to set it off, then there is $8,500. It is also known that, $3,000 can be set off against the ordinary income, then there would be $5,500 ($8,500 - $3,000) of LTCL to be carried forward.

In the year 2016:

STCG after setting off STCL is $1,500.

LTCG is $5,700 and LTCL carried forward is $5,500 and LTCL in 2016 is $5,500. LTCL after setting off STCG balance and LTCG is $3,800. It is also known that, $3,000 can be set off against the ordinary income, then there would be $800 ($3,800 - $3,000) of LTCL to be carried forward.

In the year 2017:

STCL after setting off against STCG is $2,000

LTCG is $3,500 out of which $2,000 can be set off against STCL, after which LTCG which can be set off against LTCL is $1,500. LTCL carried forward from 2016 is $800 and LTCL in 2017 is $10,000. LTCL remaining after setting it off against LTCG is $9,300. It is also known that, $3,000 can be set off against the ordinary income, then there would be $6,300 ($9,300 - $3,000) of LTCL to be carried forward.