Capital Loss Carryover From 2004?

Question

I am helping someone prepare their taxes. Here's the situation. In tax year 2004 she had approximately $6,000 in short-term Capital Loss Carryover from losses in stocks. In tax year 2005 she had very little income, and was not required to file, so she did not file at all. Here's the problem, for 2006 she has approximately $30,000 in Capital Gains from the sale of some property. What I would like to do is use the $6,000 Capital loss from 2004 and use it to offset some of the 2006 gain. My understanding is you can carryover losses to future years to offset gains. I am using tax software(Turbo Tax) and it asks to enter Capital Loss Carryover from 2005. Since she did not file in 2005, there is no carryover. The carryover is from 2004. My questions are this, can I somehow apply that carryover loss from 2004 on her 2006 return? How would I go about this? Does the IRS requires carryover losses to be used in consecutive years?

Thank You

Answer 1

For 2005, her carryover was decreased by $3000 whether she could use it or not. That happens each year. So if her carryover from 2004 was $6000, then she has the rest, or $3000, left to use for 2006. Just key in $3000 when TurboTax asks for carryover from 2005.

JoBlo and Charles are not correct, you don't get to skip years if you don't have enough income to use all of the allowed $3000 per year.

Answer 2

She can take a capital loss forward indefinately until it is used up or until she dies. If she was not able to use the carryover loss from 2004 on her 2005 tax return, that unused amount would carry-forward to 2006. So to answer your question, she can offset her gains with the carryover loss incurred in 2004. What was leftover from 2004 carryfoward to 2005 and to 2006.

To think of it another way. If she had $13,000 in cpaital losses in 2004, she would have used the max. $3,000 that year. So $10,000 would carryforward to 2005. Since she didn't use any of the carryover the following tax year the $10,000 would carryforward to 2006.

Answer 3

Unfortunately you cannot skip a year when carrying over losses. Since she had $6000 in losses, she could have claimed $3000 in 2004, and carried $3000 over into 2005, but nothing can be applied to 2006 in any case.

Best course of action may be to file an amended return for 2005 to see if she can recoup some of the credit. But since she didn't file, I doubt this would be of much use.

By the way, if the losses had been higher, she could file an amended return in 2005, claim the maximum $3000 for that year and carry over the rest to 2006.

Answer 4

If you have a $6000. loss in 2004 to carry forward, you would need to figure the amount that would have been used for 2005. If she made as much as $3000. in 2005 then that is how much that would have been written off against that income. But if she made $1,000. total income, then only $1,000. would have been used against that income. She would have $3,000. loss to carry forward to 2006 even if she wrote off the full $3,000. in 2005.

just enter the amount of loss she has left,,