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If I have realized a large amount of capital loss this year, can I choose which of the following years that the capital loss can apply to offset taxable income, and how much capital loss is applied in the years I choose? For example, can I apply a loss of $1000 for the 3rd year, a loss of $4000 for the 5th year, and don't apply any loss for this year, next year, the 4th year?

For example, suppose this year, my income is very low and negligible, and therefore my tax for this year is going to be zero. Can I choose not to apply capital loss for tax for this year? But save them for some years in the future, when I have much more income and therefore nonzero tax to pay?

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  • 1
    how about getting a tax adviser?
    – littleadv
    Jun 10 '12 at 2:07
  • @littleadv: I wonder how to get a tax adviser and whether I have to pay for that?
    – Tim
    Jun 10 '12 at 15:48
  • you open your local yellow-pages and look for Enrolled Agents or CPA's or Tax Attorneys. Then you call them up and ask for a consultation. Most provide initial consultation for free, for continuous question asking you would probably have to pay some.
    – littleadv
    Jun 10 '12 at 18:52
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Capital loss can only be applied to offset capital gain (Correction: As JoeTaxpayer rightly mentioned, $3K of the capital losses can offset ordinary income in any year, after offsetting all the capital gains). Remembering your other questions, IRA distributions totaling to less than the basis do not create capital loss.

You can carry forward the capital loss until you've exhausted it, but it is being recalculated each year anew. You cannot have capital loss in year X, capital gain in the year X+1, and then offset the capital gain in the year X+2 with the losses carried forward from the year X. You must offset the gains of the year X+1, and if you still have losses remained, you carry them forward.

If you don't have capital gains - there's nothing to apply the losses carried forward to, and you carry them forward as they are to the next year, and so on, until capital gains appear to offset them.

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  • Thanks! "You cannot have capital loss in year X, capital gain in the year X+1, and then offset the capital gain in the year X+2 with the losses carried forward from the year X. You must offset the gains of the year X+1." Does it mean that even when the tax for the year X+1 is zero because of low income only, must the loss in year X still be used to offset positive capital gain in year X+1, even though the loss doesn't help to reduce any tax?
    – Tim
    Jun 10 '12 at 2:55
  • @Tim did I mention the tax liability anywhere? I didn't. What made you think it has any bearing? Its irrelevant.
    – littleadv
    Jun 10 '12 at 3:00
  • So you mean that if there is positive capital gain in year X+1, the left-over capital loss in year X must be used to offset the gain in year X+1, no matter the loss help to reduce the tax or not (for example, the tax is already zero because the income is too low)?
    – Tim
    Jun 10 '12 at 3:04
  • @Tim, I mean that if you have a capital gain, and you have a carry-forward capital loss from a prior year - you must use it, or lose it. What happens to your tax liability is irrelevant. You don't have to apply it, if you don't want to, but you won't be able to carry it further forward without applying it.
    – littleadv
    Jun 10 '12 at 3:05
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    @littleadv - losses first apply to gains, but then $3000 per year can be used to offset ordinary income. The rest of your answer is correct. Jun 10 '12 at 4:18

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