Can I offset a shortterm capital gain of OVER $3K, with a capital loss carryover from previous years?

Question

I have a shortterm capital loss carryover of about $25K from earlier years of investing in stocks.
I've been deducting the standard $3K yearly from ordinary income as I don't play the market much any more.
If I were to play the market again and show a shortterm capital gain of $25K this year, wouldn't I be able to offset the ENTIRE amount and hold onto the entire gain??
I'm pretty sure I can, but my friend says I can't, and even his CPA supports him. Who is correct??? Shouldn't he get a new CPA?? :)

Answer 1

To answer your final question, yes he should. In your scenario, you would have gains of $25K in the year and losses of $25K (because losses carried forward are treated as if they had arisen in the year they were carried forward to). Net result is no capital gain. In fact if you made $20,000 gain (short term) you could use $20,000 of the losses to absorb that, use a further $3,000 to create a deduction from your other income and carry forward $2,000.

Answer 2

Yes, you can offset whatever part of the net gain from this year that your carryover would cover. If there's any carryover left after that (and after taking $3000 against this year's ordinary income) then you'd carry over the rest to 2007. The $3000 a year limit is just a limit on what you can take against ordinary income.

Put the total carryover on your schedule D, and follow the instructions on the form.

As far as your friend's CPA, it's possible that he didn't understand what your friend was asking. Otherwise, I'd worry about his or her abilities.

Answer 3

Capital helpful aspects are taxable, no longer deductible. i anticipate you're rather asking if a capital benefit could be wiped out by making use of a carryover loss. confident you are able to assuming you nonetheless have a carryover loss. there is not any cap benefit carryover, it is taxed the 300 and sixty 5 days of the ease. in case you have a internet capital loss for a given 300 and sixty 5 days, you persist with $3000 of it to the different income each and every 300 and sixty 5 days, then carry the loss over to right here 300 and sixty 5 days, netting it with that later 300 and sixty 5 days's capital helpful aspects and losses, and continuing to hold over internet losses over $3000. in case you suggested each and every thing right, and had no different important losses interior the period in-between, you're able to have a number of your Delta loss left to internet with your 2011 benefit. that would dissipate as much as $40K of the carryover.