Message Font: Serif | Sans-Serif
No. of Recommendations: 2
My 2 year old daughter is about to have a 6K loss as a result of the GX bankruptcy. I don't expect that she will have any income or capital gains this year, but I'm wondering if this loss can be carried forward until the day that she does.


1) is there any limitation on how long a loss can be carried?

2) do I need to file a tax return to establish the loss in the year it was sustained, or can I wait several years until the time there is a gain to be balanced against it?

First things first. The GX bankruptcy does not create a capital loss for your daughter. The stock is not worthless, yet. If you want the capital loss, you will have to sell the stock. Otherwise, you will have to wait for the bankruptcy court to determine that the stock is truly worthless.

Assuming you do establish the loss (by sale or bankruptcy court action), you will have to file a tax return for your daughter in the year the loss was sustained to establish the capital loss carryforward. You cannot include the loss on your own return.

You will have to file tax returns for her for each subsequent year until the loss is used up. She can carry the loss forward indefinitely (actually until it is used up or she dies).

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.