Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
Just trying to make sure I have this right. If I have capital gains from the sale of a rent house, I can off-set them with capital losses from the sale of shares of stock? Both of these are long term capital gains and losses. Both having been held for a few years. (I think long term gains and losses, items have to be held for over a year for them to be long term?)

Let's say I have capital gains from the sale of the rent house of $20,000. I can off-set those gains by selling an equal amount of losing shares of stock?

Now, let's say the stock loss is greater than $20,000. Let's say $30,000. I can then carry over the remaining $10,000 at $3,000 per year on my taxes? (I am not sure of the amount of $3000) But I can initially use the loss of $20,000 in the same year as I sold the rent house?

Thanks for any verification. I appreciate it.

Footsox
Print the post Back To Top
No. of Recommendations: 1
Just trying to make sure I have this right. If I have capital gains from the sale of a rent house, I can off-set them with capital losses from the sale of shares of stock?

Yes.

Both of these are long term capital gains and losses. Both having been held for a few years. (I think long term gains and losses, items have to be held for over a year for them to be long term?)

Correct.

Let's say I have capital gains from the sale of the rent house of $20,000. I can off-set those gains by selling an equal amount of losing shares of stock?

To be precise, by selling enough shares TO PRODUCE A LOSS OF $20,000.

Now, let's say the stock loss is greater than $20,000. Let's say $30,000. I can then carry over the remaining $10,000 at $3,000 per year on my taxes? (I am not sure of the amount of $3000)

Yes. And $3,000 is the correct amount.

But I can initially use the loss of $20,000 in the same year as I sold the rent house?

Yes.

Bill
Print the post Back To Top
No. of Recommendations: 2
Let's say I have capital gains from the sale of the rent house of $20,000.

Please keep in mind that in addition to capital gains on the rental house, you will also have recaptured depreciation. So it may be that not all of what you consider 'gains' will be gains that are taxed at the capital gains rate. There will likely be some that are taxed at ordinary income rates, and will not be offset by capital losses.

AJ
Print the post Back To Top
No. of Recommendations: 1
Thanks Bill and AJ for posting responses to my question. And yes, I have taken into consideration the depreciation from the rent house. It looks like I many finally have an understanding of this.

Footsox
Print the post Back To Top
No. of Recommendations: 0
Reading these threads, and I've started a few about similar topics, I wonder how many people either intentionally or not, never do the depreciation recapture. I'm willing to bet it is a decent number. I see on a variety of sites where people think if it didn't benefit them, then there is no need to recapture it. Sadly that isn't true.

(BTW, my house and previous rental closes in a bit over 2 weeks, sold above list price with no repairs post home inspection, strong market screws buyers but aided me. So I've gone from having 2 SFHs to being homeless.)

And unlike the OP I have a ton of gains both from stocks and the house. I'll be writing the largest check outside of a home purchase in my life to the IRS :(
Print the post Back To Top
No. of Recommendations: 2
Footsox

This might help. I copy/pasted an excerpt from an article I wrote last year.

In a year of both long term capital gains & losses (LTCG & LTCL) and Short Term Capital Gains & Loss (STCG & STCL), first net out the LTCG and LTCL and then the STCG and STCL. There will be four possible combinations of outcomes:

1. LTCG and STCG. This would clearly be a good year! The LTCG will be entered on the IRS Schedule D and included as income that will be taxed at a lower rate than ordinary income. However, the net STCG is treated as ordinary income and does not receive the more favorable capital gains treatment.

2. LTCG and STCL. These are entered on Schedule D and are netted out. If the LTCG value is larger than the STCL value, the net will be a LTCG, which will then be taxed at the more favorable capital gain tax rate. But if the STCL value is greater than the LTCG value, the net of this will be a STCL. See below the tax treatment of both long term and short term net capital losses.

3. LTCL and STCG. These are also netted out together on Schedule D. If the STCG value is larger, the result will be a STCG which will be taxed as ordinary income. If the LTCL value is greater, there will be a net capital loss (see below)

4. LTCL and STCL. These values are combined for a total capital loss, but they do not lose their identity as LT or ST. This would not be a very good year.

If the net of capital gains and losses is a capital loss, the IRS allows up to $3,000 of this amount to be claimed that year as ‘negative income’, meaning it reduces ordinary income by up to $3,000 or less if the total of capital loss is less than $3,000. If the capital loss is greater than $3,000, the excess is carried forward to the next year and this calculation is run again. The carry forward maintains its character as long term or short term. If the loss is very large, it can be carried forward indefinitely until the annual $3,000 deductions and future net capital gains use it up.

There are two exceptions to this capital gains calculation. Capital gains from the sale of investment real estate and collectibles. Space does not permit my going into the detail on these, so I’ll summarize by saying that part of the capital gain on the sale of investment real estate, such as a rental home, will be treated as ordinary income regardless of the holding period but the tax rate is limited to a maximum of 25%, and all collectibles capital gains will be treated as ordinary income with a maximum tax rate of 28%.

BruceM
Print the post Back To Top
No. of Recommendations: 0
Thank again everybody for the excellent answers. Just one more thing for me to ask... OK, I am only dealing with Long term capital gains and losses -- none are short term. Here is an example:

Let's say I sold my rent house and (after depreciation) there is $40,000 in long term capital gains. So, now in the same calendar year (2020), I sell shares of stock at a loss -- long term capital losses. And let's say that loss is $50,000. So... in the current tax year (that both items were sold) the long term capital losses (from the sale of stock) wipe out the long term capital gains (from the sale of the rent house). So, no capital gains tax is due, right? OK. So, now there is $10,000 left over in long term capital losses, which I can carry oven into the following years at $3000 per year, until it runs out.

OK, so now it is the following tax year (2021).... And I sell more shares of stock at a loss (long term capital losses) and that loss is $20,000. And I have no other long term capital gains in 2021. Can I then use more than the $3000 per year that is being carried over, against my income?

I have losing stock sitting in my etrade account. I am trying to figure out if it is any benefit to me to sell it a little at a time over 2 or 3 years or just sell it all at once and then carry forward the losses in several years. (at $3000 per year) --OR-- I guess I am wondering if there is any circumstance whereby the $3000 carryover can become more in a particular year? Besides the first year when there are long term capital gains to offset a larger amount than $3000. Thanks again for all your help.

Footsox
Print the post Back To Top
No. of Recommendations: 6
Not quite.

Let's say I sold my rent house and (after depreciation) there is $40,000 in long term capital gains. So, now in the same calendar year (2020), I sell shares of stock at a loss -- long term capital losses. And let's say that loss is $50,000. So... in the current tax year (that both items were sold) the long term capital losses (from the sale of stock) wipe out the long term capital gains (from the sale of the rent house). So, no capital gains tax is due, right? OK. So, now there is $10,000 left over in long term capital losses, which I can carry oven into the following years at $3000 per year, until it runs out.

You get to use $3000 this year, leaving you $7000 to carry forward.

OK, so now it is the following tax year (2021).... And I sell more shares of stock at a loss (long term capital losses) and that loss is $20,000. And I have no other long term capital gains in 2021. Can I then use more than the $3000 per year that is being carried over, against my income?

You have $27000 of LTCL, of which you can use $3000 in 2021, leaving $24000 to carry forward. Once you net all of your capital gains and losses, you can only use an additional $3000 of capital loss against current year income.

I have losing stock sitting in my etrade account. I am trying to figure out if it is any benefit to me to sell it a little at a time over 2 or 3 years or just sell it all at once and then carry forward the losses in several years. (at $3000 per year) --OR-- I guess I am wondering if there is any circumstance whereby the $3000 carryover can become more in a particular year? Besides the first year when there are long term capital gains to offset a larger amount than $3000. Thanks again for all your help.

Forget about the tax consequences. Decide whether there is a good investment reason to continue to hold the losing stocks (do you think the company will rebound from a business setback, etc.) and then act accordingly. If you have $20000 in unrealized losses now, there is nothing to prevent them from increasing if you continue to hold the stock.

Ira
Print the post Back To Top
No. of Recommendations: 2
Footsox

Can I then use more than the $3000 per year that is being carried over, against my income?

No. Go back and read my posting on unused capital loss carryforwards

As to those securities you're holding that are 'underwater', I understand what you're trying to do. I suspect there are many this year thinking much the same.

If you're going to harvest tax-losses, that's fine, but you have to set up a comprehensive plan first and not just sell because the price has dropped.

Of the 66 dividend paying stocks I hold, I'm going to TLH 6 or 7 of them. This is because although formerly well run companies, the recovery ahead of them is a steep slope due to the virus-sensitivity of their industry and a couple of them many not survive.

So my first step is to find a replacement stock. This can be a stock of an industry I am under-exposed to or a similar industry. For example, I sold EPR and replaced it with SBUX. Or, with very well managed companies that are virus sensitive but will find ways to re-emerge, such as CBRL, I just stay put.

Taxation management happens as a result of investment decisions, not the other way around.

Best wishes

BruceM
Print the post Back To Top