I didn't take the MTM election last year

Discussion in 'Professional Trading' started by whitetanman, Mar 31, 2008.

  1. You can guess the rest. Bad losses for 2007. So my limit for losses is 3K, if I understand (not even close to what I lost).

    How many years can you put that 3K on future returns? Will I ever get to claim all this?

    What's really lovely is having to pay taxes on money earned this year which is really just getting back what I lost last year. That's not fair at all.

    I would easily have qualified as a trader.. oops.
  2. bh_prop


    You are entitled to write off the balance of your 2007 capital losses against any future capital gains. For example, say last year you lost 25k trading, you write off 3k on your 2007 return. Say in 2008 you make 50k trading, you are then entitled to write off the remaining 22k of your 2007 losses against your 2008 gains. So in this example you would pay taxes on 28k gains for tax year 2008.

  3. nkhoi

    nkhoi Moderator

  4. You just changed my entire perspective on 2008. Thank you.

    I will be sleeping much better now. My wife thanks you too.
  5. One minor snag, which will have an affect on the total loss.

    I traded most of the same stock in December, which would put those less than 30 days for the wash sale rules. Do I recover that the next year, or maybe I should just ignore the rules.

    I was going to get the tradelog but there is a MTM option and a regular option. I would need the MTM option to ignore the rule. If it is properly reflected in the next year, I'll play by the book.
  6. you are allowed to subtract the losses in perpetuity until they are gone. Say you had a capital loss of 300K, then next year you made 200K you can still use the losses up to a maximum I believe of 3k.
  7. I'm still nervous about this.. anyone confirm this is correct? I still wake up with nightmares some weeks thinking about it, even months later.

    Also, on my Schedule D my reportable losses were $7,454.00 (which only 3K total can be taken), but my actual losses were 25K. I'm not sure how that actually happened because aren't wash sale rules only really in affect the last 30 days of the year and for the next 30 into the next year?

    I think I've just read so much I am totally lost and confused and don't know if I'm coming or going.
  8. From what I understand, you can only carry forward $3,000 in losses each year. So, if you lost $9,000 this year, you could carry forward $3,000 for three years.

    Cap gains, you'll pay as the Gov't isn't going to let you carry forward $9,000 for example, in losses to offset $50,000 in gains. Remember, it's the Government we're talking about here...
  9. Wash Sale Rule from Investopedia:

    "An Internal Revenue Service (IRS) rule prohibiting a taxpayer from claiming a loss on the sale of an investment when the same investment was purchased within 30 days before or after the sale date. Also know as the "30-day wash-sale rule".