long term and short term gains and losses

[TrustUser]

california. i am hopefully gonna sell a property this year, in which i will be taking a loss (long-term). i will also hopefully be able to sell some flippers this year, for short term gains. how does this work ? i do all my taxes with taxslayer, so i am not concerned about doing it correctly.

but i would like to know what correct actually is ? can i simply just apply the gains against the loss, until the loss disappears ?

i expect the loss to be considerably more than a gain on 1 flipper sale. so what i would hope would happen is that each gain on the flipper could simply be applied against the loss of the property, until there was no more loss to be applied ?

thanks

 

[Taxing Matters]

california. i am hopefully gonna sell a property this year, in which i will be taking a loss (long-term). i will also hopefully be able to sell some flippers this year, for short term gains. how does this work ?

There is a process when doing Schedule D in which you first net out the long-term gains and losses and short term gains and losses separately. When you have the final long term and short term gain/loss figures you then combine those to determine your overall gain or loss. If you have an overall capital loss you are limited to using only $3,000 of that loss against ordinary income and the remaining loss is carried forward to the next year. If you have an overall capital gain you then determine what rate of tax will apply to that gain to figure the tax you pay.

i do all my taxes with taxslayer, so i am not concerned about doing it correctly.

That's a potentially dangerous view to take. Don't blindly trust that you'll get it right using any tax program. Even the really good ones (I'm not familiar with Tax Slayer specifically) can sometimes have errors in them. Also, there are some situations which they just won't handle well, notably those that are unusual or particularly complex. And, of course, you have to pay close attention to make sure you are entering your data properly. If you don't understand at least the basics tax rules that apply to your situation you can make errors without knowing it. As with using any computer program, the old programmer's adage still applies: garbage in, garbage out (GIGO). I've seen clients screw up their returns using these programs because they weren't careful about how they used them. If the return gets screwed up the IRS and the state still hold you ultimately responsible for that. That does not mean you shouldn't use those programs. Lots of people use them with no problem. I've used tax prep software myself. I'm just saying take a little care in using them and pay attention to the results you get to make sure they make sense.

 

[TrustUser]

thanks tm,

that works out well, for me - just what i was hoping. (if i understood you correctly). i knew about the 3000 limit. i still havent used all of that from my capital loss schedule. it keeps going down 3000 each year.

but i am probably gonna lose 75K more on this property. and maybe make about 25K or so, on each flipper

i was just hoping i could use the gains on flips each year to reduce the carryover loss, and eventually get that loss to zero.

at 3000 per year, i would never get to use it all, if that was all i could reduce it by.

i am fairly tax savvy, so i feel confident about giving taxslayer the proper info it needs. i have been using them now for about 10 years, and am very satisfied with them. that is not to say that they couldnt make a mistake - nothing is perfect. but i feel it is a fairly safe choice for me

 

[Taxing Matters]

i was just hoping i could use the gains on flips each year to reduce the carryover loss, and eventually get that loss to zero.

Yes, you do. After you carry forward excess losses from one year to the next, in that next year you again take those carry forward losses and go through the same process of netting gains and losses along with any new gains and losses you had in that year. If you again end up with a net loss, you are limited to using just $3,000 of it to reduce ordinary income. So the carry forward losses are useful to offset future gains.

 

[TrustUser]

great, i will go with that plan !!

 

[davew9128]

Flips aren't capital gains/losses. You need to step away from that false premise.

 

[LdiJ]

Flips aren't capital gains/losses. You need to step away from that false premise.

Why do you have that opinion?

 

[davew9128]

Why do you have that opinion?

You mean other than ample case law on what constitutes the business of buying and selling real property vs holding for investment?

 

[LdiJ]

You mean other than ample case law on what constitutes the business of buying and selling real property vs holding for investment?

You are automatically assuming that if someone flips a house that they are in the business of buying and selling real property. Most people who flip a house or two are not actually in the business of buying and selling real estate.

 

[davew9128]

but i am probably gonna lose 75K more on this property. and maybe make about 25K or so, on each flipper

i was just hoping i could use the gains on flips each year to reduce the carryover loss, and eventually get that loss to zero.

This doesn't sound like someone flipping a house or two, it sounds like regular and continuous activity.

 

[PayrollHRGuy]

I think you are both assuming too much from...

sell some flippers

 

[davew9128]

I think you are both assuming too much from...

Not really. In this business those are words associated with real estate people in the business of rehabbing and selling properties.

 

[Taxing Matters]

Not really. In this business those are words associated with real estate people in the business of rehabbing and selling properties.

We don't have all the facts. If in fact the OP does this on a fairly regular and continuous basis then I agree that it's business income and not capital gains. But I'd want to know what the actual history of activity is before making that call. IMO simply relying on the use of the term "flip" is pretty thin ground for any firm conclusion on the matter.

 

[PayrollHRGuy]

Not really. In this business those are words associated with real estate people in the business of rehabbing and selling properties.

We don't know from those few words if "some flippers" means 2 or 3 over the next decade or a 100 next month. You don't help the people asking questions on this forum by assuming too much.

 

[davew9128]

We don't know from those few words if "some flippers" means 2 or 3 over the next decade or a 100 next month. You don't help the people asking questions on this forum by assuming too much.

Like assuming its all capital gain or loss?