Capital Loss carryover

[veritas]

If you have a capital loss created in a joint account in a prior year and one spouse dies in a future year, does the surviving spouse lose half of the capital loss carry forward?

[gkaiseril]

Taxpayer

Since the married couple is considered the taxpayer on a MFJ return, the surving spouse would get the capital loss carryover until that spouse uses upt the carry forwardr the surving spouse passes on.

For a couple had filed MFS the year before the death of the spouse you whould have to do furhter research.

[veritas]

I'm thinking

half the loss carryforward is gone in the year after the death. The account was Joint Tennants with rights of survivorship.

[S T]

Mfs

I am thinking 1/2 C/L carryover might only apply to MFS, not MJ and deceased, but haven't researched.

Sandy

[Burke]

If they were jointly owned assets, the spousal survivor gets to carryover all the loss from a MFJ return. If a single person dies with loss c/o, it is gone after the year of death.

[S T]

Seems Muddy

Veritas,

Here is a link from another source that might help http://www.taxalmanac.org/index.php/...er_After_Death

Sandy

[veritas]

Thanks Sandy!

I read the posts and am inclined to go with Riley2's posts which is one half of the net capital loss carryover goes away.

here is the excerpt from the regulation 1-212-1(c)iii

If a husband and wife make separate returns for the first
taxable year beginning after December 31, 1963, or any prior
taxable year, and they made a joint return for the preceding
taxable year, any capital loss carryover from such preceding
taxable year shall be allocated to the spouses on the basis of
their individual net capital loss which gave rise to such
capital loss carryover. The capital loss carryover so allocated
to each spouse may be carried forward by such spouse to the
taxable year in accordance with paragraph (a) or (b) of this
section.

[dsi]

I learn everyday.

Operatives:
1. separate returns
2. joint return

Don't you just love it?

[Bees Knees]

TTB, page SB10-21 under Estate Tax Repeal:

New rules will also allow a decedent’s estate to exclude gain of
$250,000 from the sale of decedent’s personal residence without
using basis step-up to exclude the gain. A decedent’s capital loss
carryover and NOL carryover can be added to the $1.3 basis increase.
Currently, these carryovers are lost at death.

Since Estate Tax Repeal has not yet happened, and I doubt it ever will, the current rules are you lose your NOL carryover and capital loss carryover at death. The capital loss is based upon the individual spouse. If the stock was held by one spouse, and that spouse dies, the other spouse cannot continue to carry over the capital loss because that spouse never inherited the stock (it had already been sold which resulted in the capital loss).

That is why the regulation cited says when you file a separate return, and a previous year return was joint that produced a capital loss, the spouse who generated the capital loss gets 100% of that loss on his or her married filing separate return.