The maximum short-term capital loss that you can declare in a year is $3,000. You can...

The maximum short-term capital loss that you can declare in a year is $3,000. You can defer a short-term capital loss for up to 3-years. For example, if you had a short-term capital loss in 2020 of $9,000, you could take $3,000 in 2020, $3,000 in 2021, and $3,000 in 2022. You can also use a short-term capital loss to offset ordinary income even if you don’t have a short-term capital gain. 1. Should short-term capital loss be limited to $3,000 a year? 2. Do you agree if there is a limit, should loss be carried over a maximum of $3 years?

Expert Solution

Short term losses are deficit realized from sale of personal or investment property, that has been held for 1 year or less.
These lossesare first used to offset capital gain from same type and even, you have overall net capital loss forthe period, it can be off set to the maximum extent of $3000 against other ordinary income including salaries and interest income. However, married filing seperate status can claim maximum upto $1500 as deduction.
1.yes, short termcapital loss is limited to $3000 and $1500(in case ofmarried filing return separately),.
2. This loss be carried over for 3 subsequent years, to the maximum of $3000 per year.($ 1500) in case married filing separately) Any addition loss in the fourth year can be deducted, following the sale of asset.
For example, as in the example given in the problem, if the short term capital loss is $11,000,deduction can be allowed 1st 3 years at$3000 pwrper year and in the 4 th year, $2000 can be deducted, following the sale of asset.

ekkarill92 answered 1 year ago

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