NJ capital gains tax question?

Question

I live in NJ. I have investment real estate in NY that I am selling for a long term capital gain. I have stocks that I can sell for a long term loss. On my federal income tax return, the gains and losses balance out. My reading of NJ tax law is that this isn't the case - since the gains and losses are in different categories I need to pay capital gains on the real estate, and the stock market loss is "wasted" (and thus I have to pay tax even though total income is zero).

Is my reading correct? Is there anyway to get around this?

Thanks.

Answer 1

I'm thinking you are reading it incorrectly. The gain from the sale of the real estate goes on NJ Schedule B as does the loss from the stocks. These net together to give you a final gain/loss on line 4 of Schedule B. If it is a loss, it is ignored. If it is a gain, it transfers to line 18 on your NJ-1040 (or whatever line it is for 2006). When you say they are in different categories, what do you mean?

OK, I read in the instructions where it said, "You may deduct Federal passive losses in full in the year incurred against any gain within the same category of income, but only in the year that it occurred." I believe that does NOT apply to you. Had the sale of stock been from a Partnership instead, then it would be from a different category and they would not nullify each other. But in your situation, since both events go on Schedule B, they do "balance out". If the result is negative, you will not be able to subtract it from your other income. If the net result is positive, you must include it on 1040-NJ line 18.

Answer 2

Your initial reading is correct. However, I believe it is possible to convert the investment property to the same category, if you 1035 the money into an annuity. You can follow this link and fill out the form, and someone who is familiar with the NY/NJ law will help you out. http://www.tkqlhce.com/click-2177451-10426215