Hello, I had a rough year last year and lost about $7500 trading the Eminis. I've got a regular job, so I know I can't apply for trader status...but how will this work? It looks like it split into $4500 long term capital losses, and $3000 short term capital losses (60/40 rule). Will I be able to apply $3000 short term losses and $3000 long term losses this year? Or is the rule that I can only apply one of the $3000 losses this year and carry the other $4500 over the next two years ($3000 next year, $1500 the following year). Is there anyway to apply the whole $7500 loss just for this year? That would be nice THanks in advance@
In a word, no. If you're writing off capital losses against earned income, it makes nor dif whether short/long term loss. Presuming you "recover" in '03, I don't THINK it will make any difference offsetting this year's gains vs. loss carry forwards. For the excess gains, better consult your tax preparer.
unless you have other capital gains you can only use 3000 per year total against wages and carry the rest forward.
For your Information: Bush has spoken about raising the maximum capital-loss deduction. An investor can use capital losses to offset capital gains, and if there is an excess of the losses, can now deduct up to $3,000 from ordinary income. Any remaining losses can be carried over, to generate $3,000 deductions in future years. The House Ways and Means Committee early in October cleared a bill to raise that annual limit to $8,250. But the bill was never passed, and it is not clear if such a provision would be in a new tax bill next year. Such a provision would meet at least some opposition on Wall Street out of fear that it would encourage the selling of stocks at a time when the markets are already shaky: http://www.taxpolicycenter.org/news/dividends.cfm
The tax laws (are not laws, but that's another subject) are not black and white and open to a lot of "interpretation". If you spent a reasonable amount of time trading the emini's and are continuing to do so there is no reason you cannot claim your trading as a "business" and not only take the losses, but also expenses related to your trading business. Worst case scenario they audit you, unlikely if file extensions and don't file until 10/15. Even if audited and they refuse to allow the trading as a "business" you are working to establish so you can leave your job, then you are only liable for a 10% penalty on the amount of tax savings they disallow. Of course, following this course of action takes some courage, but so does trading.