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Author: FoolForProfit Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Whether To Claim or Roll Capital Losses Date: 12/6/2005 2:31 PM
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Hi All,

I currently have $2700 in capital losses that were rolled over from the 2004 tax year. From the current year I have approximately $5000 of capital losses. Not a great year, I know.

My questions concerns the claiming (up to $3,000) of capital losses. I know that an individual may carry forward capital losses for the duration of his/her life.

If I claim the maximum $3,000 in losses, it will save me approximately $1,000 on my tax return, which I will realize in April (i.e. actually money in (or not out of) my pocket).

If I do not claim the losses, and roll them forward. I could use these losses to offset any future gains. Most of my gains, if any, are short term, less than 1.0 year holding period. This also assumes I'll some day have gains.

Basically, I can roll forward $7,700 in capital losses indefitely to offset any future gains, which will be short term and taxed at ~40-50%.
Alternatively, I could claim the max and just roll forward the remainder.

I am considering rolling forward all of my losses until I realize gains and offset the gains w/ these losses. Is this the optimum strategy? Also, if I do roll all losses forward (i.e. claim no losses), is there a federal inflation rate I can use to calculate a NPV of the losses or can I only claim the nominal value.

For example, having lost $2,700 in 2004, that would be worth more than $2,700 in 2006 due to time value of money/inflation, but I'm not sure if I can claim more than the nominal dollar loss. Every year that I wait to claim or offset this loss, I lose a bit of real value due to time-value errosion of my 2004 losses.

Any thoughts, suggestions, strategies to optimize life-time capital gains and losses in a situation like this are much appreciated.

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