982 Discharge of debt.

[ronald weiner]

982 Discharge of debt.

A party has $50,000 in capital losses on prior years tax returns.
Party files 982 Discharge of debt.
Does this effect his capital losses.

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[Tom Healy CPA]

On Feb 9, 7:39 pm, ronald weiner <malibur...@gmail.com> wrote:
> 982 Discharge of debt.
>
> A party has $50,000 in capital losses on prior years tax returns.
> Party files 982 Discharge of debt.
> Does this effect his capital losses.
>
> --

I don't know whether this "effects" the capital loss carry forward,
but it does affect the carry forward to 2012 (assuming you are talking
2011 here). Any capital losses not used up in the COD year have to be
reduced dollar for dollar going into 2012. Thus, in the simplest case,
$50,000 of Capital loss carried into 2011. T uses $3,000 against
ordinary income, leaving $47,000 to carry to 2012. If the discharge of
debt is, say, $30,000, and the capital loss is the "first" attribute
you need to reduce, you reduce the $47,000 by $30,000, yielding a
$17,000 capital loss carryover to 2012.

[Alan]

On 2/13/12 4:52 PM, Tom Healy CPA wrote:
> On Feb 9, 7:39 pm, ronald weiner<malibur...@gmail.com> wrote:
>> 982 Discharge of debt.
>>
>> A party has $50,000 in capital losses on prior years tax returns.
>> Party files 982 Discharge of debt.
>> Does this effect his capital losses.
>>
>> --
> I don't know whether this "effects" the capital loss carry forward,
> but it does affect the carry forward to 2012 (assuming you are talking
> 2011 here). Any capital losses not used up in the COD year have to be
> reduced dollar for dollar going into 2012. Thus, in the simplest case,
> $50,000 of Capital loss carried into 2011. T uses $3,000 against
> ordinary income, leaving $47,000 to carry to 2012. If the discharge of
> debt is, say, $30,000, and the capital loss is the "first" attribute
> you need to reduce, you reduce the $47,000 by $30,000, yielding a
> $17,000 capital loss carryover to 2012.
>

I don't disagree but... I believe this rule does not apply to discharge
of qualified real property business indebtedness and discharge of
qualified principal residence indebtedness. In addition, see Line 5 of
the 982 for an election that would change the answer. Lastly, (I may be
wrong here.) there is a pecking order as to how you change your tax
attributes. There are 3 items (lines 6, 7 or 8) that precede the
adjustment for capital loss carryovers.

--
Alan
http://taxtopics.net