Newbie Question

Discussion in 'Taxes and Accounting' started by jessicatrader, Jan 2, 2015.

  1. Hi, I have some basic questions.

    How are capital losses/gain treated relative initial capital you started with?

    Say you had a realized capital loss in year 1. Here I guess no taxes are owed and you can actually use that loss to deduct.

    In year 2, you made a profit but you just recouped your last year loss. Basically, you are break even. Do you still owe tax for the year 2 profit? Effectively putting you in net loss?

    Similarly if you had profit in year 2 exceeding the break even point, are all your year 2 gains taxed? or just the amounts above the break even point are taxed?

    Thank you in advance for your kind replies !
     
  2. Capital losses, 3K of which can offset non-capital income (e.g. interest, wages, etc) in year one are carried forward. E.g. 100K capital loss in year 1; 3K loss limitation = 97K loss carryforward. The loss carryforward will eat through gains; any excess gain over the carryforward is taxable. Please let me know if you would like some additional clarification.

    Adam