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Suppose I have $5k of loss carryover from investment losses in 2010 and I realize $15k in investment gains in 2011 (assume that they're both short-term losses and gains), in calculating my Adjusted Gross Income and Modified AGI, will my investment gains contribute +$10K or +15K to my AGI in 2011 (excluding the max $3K offset to AGI from NOLs without investment gains)?

Also, could you kindly refer me to exactly where the IRS talks about how NOLs net against investment gains for households when calculating the AGI and MAGI?

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up vote 1 down vote accepted

First: I am not a tax advisor. You should see one.

Second: Check out this answer on Intuit's web site:

To find your 2009 Capital Loss Carryover amount you need to look at your 2009 return schedule D page 2. Line 16 will be your total loss and line 21 should be a max loss of 3,000 for 2009. The difference between line 16 and 21 is the carryover loss to 2010.

So I believe that means your number is +$10k (assuming you had profits as well as losses).

Regarding your second question, see this page, especially:

Refiguring your tax. To refigure your total tax liability for a carryback year, first refigure your adjusted gross income for that year. (On Form 1045, use lines 10 and 11 and the “After carryback” column for the applicable carryback year.) Use your adjusted gross income after applying the NOL deduction to refigure income or deduction items that are based on, or limited to, a percentage of your adjusted gross income. Refigure the following items. The special allowance for passive activity losses from rental real estate activities.

Taxable social security and tier 1 railroad retirement benefits.

IRA deductions.

Excludable savings bond interest.

Excludable employer-provided adoption benefits.

The student loan interest deduction.

The tuition and fees deduction.

If more than one of these items apply, refigure them in the order listed above, using your adjusted gross income after applying the NOL deduction and any previous item. (Enter your NOL deduction on Form 1045, line 10. On line 11, using the “After carryback” column, enter your adjusted gross income refigured after applying the NOL deduction and after refiguring any above items.)

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Hi @Peter K.: Thanks for your response. I found the links very useful. But you didn't answer my questions. I think looking at the Form 1040 and Schedule D, the answer to my first question in +$10K. –  Tuva May 28 '11 at 21:13
@Hydra: Assuming that you had investment gains (+$15k), then I agree. However, I am not an accountant or tax advisor. :-) –  Peter K. May 28 '11 at 21:18
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