how to calculate the the "Long-Term capital loss carryover" from the schedule D?

Question

In the line 14 of the Schedule.D
I have a Long-term capital loss carry over -3,844 in 2003 tax form, and on the 2006, I have a Long-term capital loss carryover of -351. I want to know how they calculate the number?

Answer 1

You are doing your taxes using software and some years you see the long-term loss carryover. I hope you are keeping the same software and that the software carries the loss forward for you. If it hasn't, you can amend your returns starting with 2003 since you may be due a refund.

When your capital losses are greater than your capital gains, you are allowed to deduct $3,000 of your losses each year. Leftover losses are "carried forward" to succeeding years until they are used up. A loss carried forward offsets gains for the next year, etc. So losses can be comingled together for several years. IRS Publication 550 has more details and worksheets, showing the relationship between short-term and long-term gains and losses.

Make sure you use the capital loss carryover of $351 on your 2007 tax return.

Answer 2

Mahal's answer is good and is very detailed and complete. The only thing I'd add is that unlike pretty much all other tax forms, you don't have to use a version of 1040X for a particular year, the current one will do.

Answer 3

You have to net together all of your losses and gains in all years, and then you carry that loss forward from year to year until it's gone. (You're allowed $3000 per year.)

If you had a loss of -3844 in 2003, you should have applied $3000 in loss on your 2004 return and $844 loss on your 2005 return. If you didn't, you need to amend your returns for those years.

You can amend the following years on or before April 15:

2006
2005
2004
2003 (current year and 3 previous years)

On April 15, you're no longer allowed to amend your 2003 return.

It's really simple. Just get a 1040x for 2004 (you need the form that says "2004"), and show the loss as an adjustment. You'll get whatever refund you would have had coming that year, and you'll get it this year with your 2006 return.

Then do the same thing with your 2005 return. (You need a 1040x for the year 2005.)

File your 2006 return as you normally would. On schedual D, you need to show a loss of $351.

(For each of the 1040x forms, you also need to fill out a schedual d for that year and include it. It would help if you enclosed a copy of the 2003 return showing the loss carryover.)

In total, you need the following forms:

2003 return (copies)
2004: 1040x and schedual d
2005: 1040x and schedual d
2006: 1040x and schedual d
(each form needs to be the version for that year)

If I misunderstood your question, let me know. You can e-mail me. Also, if you took the "additional child tax credit" or the "earned income credit" for any of these years, let me know, because they're going to be affected.