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Short-Term Capital Loss Rules

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Water Cress

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Jun 25, 2002, 10:11:17 AM6/25/02
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I am contemplating selling my stock in a company beset by recent accounting and
product problems. If I sold, I would have a short-term capital loss of around
$1700. Is this directly deductible from my Adjusted Gross Income?

Are capital losses classifed as to long- or short-term?

Don Priebe

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Jun 25, 2002, 11:27:26 AM6/25/02
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> I am contemplating selling my stock in a company beset by recent
> accounting and product problems. If I sold, I would have a short-term
> capital loss of around $1700. Is this directly deductible from my
> Adjusted Gross Income?

Net capital losses are directly deducted from other income up to $3,000 per
year ($1,500 MFS). Any excess loss is carried forward to the next year.

> Are capital losses classified as to long- or short-term?

Yes. Short term losses are first netted against short term gains. Then
long term losses are netted against long term gains. Then short term
gain/loss is netted against long term gain/loss. If the net result is a
loss, the first $3000 is deducted directly and the remainder carried
forward.
--
Don EA in Upstate NY


Rich Carreiro

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Jun 25, 2002, 11:32:25 AM6/25/02
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nastur...@aol.com (Water Cress) writes:

> I am contemplating selling my stock in a company beset by recent
> accounting and product problems. If I sold, I would have a
> short-term capital loss of around $1700. Is this directly deductible
> from my Adjusted Gross Income?

It depends. Do you have any other capital gains or losses?
If your total, combined capital loss is less than $3000, you
can deduct the whole loss. If the loss is over $3000, you
deduct $3000 and carry the balance over to next year.

And technically it's not deducted from AGI. Rather, it makes AGI
lower because the loss is part of the AGI computation (you enter a
negative number on the Capital Gain/Losses line on the front of 1040
in the section for computing gross income).

> Are capital losses classifed as to long- or short-term?

Yes.

--
Rich Carreiro rlc...@animato.arlington.ma.us

D. Stussy

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Jun 25, 2002, 3:13:07 PM6/25/02
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On 25 Jun 2002, Water Cress wrote:
>I am contemplating selling my stock in a company beset by recent accounting and
>product problems. If I sold, I would have a short-term capital loss of around
>$1700. Is this directly deductible from my Adjusted Gross Income?

One is permitted to deduct up to $3k of capital losses that exceed gains
against other income (general rule; some exceptions do apply - which all reduce
the amount).

>Are capital losses classifed as to long- or short-term?

That depends on how long you owned the stock. Capital losses can be either.

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