Question

In 2019, Paul, a single taxpayer, has taxable income of $30,000 exclusive of capital gains and losses. Paul incurred a $1,000 short-term capital loss and a $4,000 long-term capital loss. What is the amount of his long-term capital loss carryover to 2020?

Answer 1

=$2,000 ($1,000 + $4,000 - $3,000)

Step-by-step explanation:

Capital loss carryover is the amount of net capital losses eligible to be carried forward into future tax years.

Net capital losses = Total capital losses - Total capital gains

Net capital losses can only be deducted against ordinary taxable income up to a maximum of $3,000 in any one tax year.

Net capital losses exceeding the $3,000 threshold can be carried forward to future tax years until exhausted.

There is no limit to the number of years a capital loss can be carried over.