- quote -

You already said that you can't use it up. Assuming that's
true, the best you can do is take advantage of the carryover
to give yourself more flexibility in buying and selling
securities.

Under normal circumstances, when you're deciding whether to
buy or sell a security, you have to worry about how it will
impact your taxes that year. If you think a stock or mutual
fund has reached its peak you usually want to sell, but you
might put it off because you don't want to pay the capital
gains tax that year. Or if you're thinking about buying a
mutual fund, you usually want to time it so you don't buy
right before it declares a large capital gain distribution.

But if you have this unquenchable capital loss carryover you
can buy and sell whenever the price is right. You don't
have to worry about the tax consequences.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

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- quote -

Huh? Do you think I can buy a mutual fund for $1,000, get
$200 in capital gains payouts, and have the shares still
worth $1,000? I'd love to do that all year, I'd get rich
real fast.

- quote -

Oh, are you assuming that I re-invest the $200? Then I end
up with $1,000 worth of mutual fund, with a basis of $1,200,
and $200 of capital loss used up. But if I sell, I get the
$200 capital loss back, so I still don't see the benefit.

- quote -

The first umpteen thousand (full capital-loss carryforward)
is tax free. How did buying the fund with capital gain
payout benefit me more than a similar fund without the
payout?

Seth

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

- quote -

How does that differ from me buying a different mutual fund
for $800 and keeping the other $200 in cash? Either way, I
have $200 in cash and $800 in a mutual fund; if I sell, I
have the same carryforward ($200 used and restored in the
$1000 purchase, untouched in the other); if I sell later
when it's up to $1000, I still have the same carryforward in
both cases.

- quote -

But that doesn't help me much; the issue was using it up.

(Can a buy/sell agreement produce capital gains? That is, I
buy something for $1,000 now, with a contract that says
you'll buy it back for $1,100 in two years. Is the $100
capital gain or interest?)

Seth

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

- quote -

The value of your shares is unchanged by this year end tax
impact. At the same time, your basis increases by the $200
of taxable capital gain.

- quote -

Since your basis in the fund is now $1,200, the first $200
of appreciation (from your original $1,000 investment) will
be tax free.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

- quote -

The benefit is that you don't have to pay tax on the
distributed gain, because it just eats away at the huge
carryover you have.

Basically, if you have so much carryover that you'll never
use it up, you essentially never have to pay capital gains
tax again. Which means that you can ignore them when making
investment decisions.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

- quote -

How does that help? Suppose I buy a mutual fund for $1,000
of which $200 is unrealized gains. They realize it, and pay
me $200 in capital gains. That offsets $200 of capital
loss; but my shares in the fund are now worth only $800, so
I have the same loss if I sell them (and if I don't sell
them, and wait for the $800 to appreciate back to $1,000, I
might just as well have bought $800 worth of any other
mutual fund and waited for it to appreciate.)

Seth

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

You can use them forever at 3K per year to offset income.
There was some talk of congress COLA indexing this 3K, or
increasing it for retirees who have different income
conditions.

If you ever start investing again you can buy "unrealized
gains" in mutual funds in the future to cut taxes. I've
done some of that myself. You find unrealized gains in
previews of year-end distributions or growth stocks inside
prospectii (e.g. lots of GOOG).

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

You can use them forever at 3K per year to offset income.
There was some talk of congress COLA indexing this 3K, or
increasing it for retirees who have different income
conditions.

If you ever start investing again you can buy "unrealized
gains" in mutual funds in the future to cut taxes. I've
done some of that myself. You find unrealized gains in
previews of year-end distributions or growth stocks inside
prospectii (e.g. lots of GOOG).

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Hello,

I had very large gains in 1999, paid approximately $50k
taxes on them, then in the stock market bust of 2000 lost
most of it.

Besides the great learning lesson, I'm now carrying over
$250k of capital losses and $30+k of margin interest paid
carryover.

I've invested most of my portfolio in a house which I plan
to keep.

My problem is that i will never use up my capital gain
carryovers.

Any ideas how I could benefit from them? Is there any
income averaging or re-statement of those tax years that
could help?

Thanks in advance.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >