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I think I made a mistake on my income taxes for 1997 which I signed on 4/3/1998 (and presumably filed that day or the next).

I have checked the IRS website and it appears that I can file a 1040X "within 3 years from the date I filed", so before 4/3/2001.

I believe I filled out schedule D, part IV incorrectly because it appears I did not derive the benefit of the lower LTCG rates. However, in looking at the form I cannot tell what my mistake is, because it appears that I followed the instructions.

I filed MFJ. I had four short term gains which I reported on line 1 and two long term gains which I reported on line 8. All were from sales of common stock. Here is the relevant information from my schedule D (all amounts are positive):

line amount description
7 222 net short-term capital gain
15 2498 28% rate gain
16 2498 net long term capital gain
17 2720 "combine lines 7 and 16"
19 26143 taxable income from 1040 line 38
20 2498 "smaller of 16 or 17"
21 0 form 4952 line 4e
22 2498 "subtract 21 from 20"
23 2720 "combine 7 and 15"
24 2498 "smaller of 15 or 23"
25 0 unrecaptured section 1250 gain
26 2498 "add lines 24 and 25"
27 0 "subtract 26 from 22"
28 26143 "subtract 27 from 19"
29 26143 "smaller of line 19 or $41,200"
30 26143 "smaller of 28 or 29"
31 23645 "subtract 22 from 19"
32 26143 "larger of 30 or 31"
33 3919 "tax on line 32"
34 26143 "line 29"
35 26143 "line 28"
36 0 "subtract 35 from 34"
37 0 "multiply 36 by 10% (.10)"

The rest of the form carries through pretty much, and lines 52, 53, and 54 end up being 3919.

It seems that line 37 should be figuring the portion of my LTCG from lines 15 and 16 which is to be taxed at the preferential 10% rate as opposed to the ordinary income rate of 15%. However, since line 37 is zero and lines 52-54 are all the same, it appears that I made a mistake.

It seems like somewhere there should be about a $125 credit or delta ($2498 * (15% - 10%)), which should be what I should get back via a 1040X.

Can anyone point out my mistake?


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