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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75777  
Subject: Re: Can I use a capital loss to offset Roth tax? Date: 11/12/2003 12:48 PM
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The Capital loss will end up on Schedule D, Line 17 and $3000 of that will be brought forward to your Form 1040, line 13, as a loss. The remaining portion of the loss will be carried over and used next year in the same manner unless you happen to have a capital gain as an offset next year. If not, then you will have another carryover loss to use in 2005 at $3000 per year until the total loss has been used up.

Thus, the loss you have sustained on that tech stock will be used to offset the tax on the IRA conversion to the tune of $3000 ($1500 if you are married filing separately). It all happens on Form 1040 whereas a capital gain would be written off on Schedule D before any remainder is brought to Form 1040, line 13. In the end, you get the thing you wanted which was to use the capital loss to offset the tax on the conversion. Congratulations!



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