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Roy (or anyone who knows):

Is there a limit on the amount of short/long term losses that can be used to offset gains in a given year? For example, gains $30,000 and losses of $10,000. Is the net result then $20,000 in gains?

Thanks for your assistance.

devine1
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devine1 writes:

Is there a limit on the amount of short/long term losses that can be used to offset gains in a given year? For example, gains $30,000 and losses of $10,000. Is the net result then $20,000 in gains?

I reply:

No and yes, in that order. :-) --Bob
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devine,

The answer isn't that simple. First you need to net the gains and losses by short term (less than 12 months) and long term (more than 12 months). The tax rates are different for long term (more preferable) and short term. However, if you have any net losses the maximum amount you can use to offset non-capital losses is $3,000 per year. Any unused amount above that can then be carried forward to future years.

Hope this helps.

CPA Bob
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[[Is there a limit on the amount of short/long term losses that can be used to offset
gains in a given year? For example, gains $30,000 and losses of $10,000. Is the
net result then $20,000 in gains? ]]

Bob and Bob are both correct.

First of all, the amount of capital losses that can be used to offset capital gains (either long or short term) is unlimited.

So while Bob points out that you must first "net out" short term gains and then long term gains, you then "net out" one against the other. So if you have $50k in short term losses, and $50k in long term gains, they'll eventually net out against one another and your net capital gain income will be $0.

Bob makes a good point that long term capital gains receive preferred tax treatment, so they are really more valuable to you than to use to offset short term losses willy nilly. So there is some tax planning that should be involved. But your basis premis is right on the mark.

TMF Taxes
Roy
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