QUESTION DETAIL
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I have short term losses arising from transactions that have been carry forwarded from previous years. Can these losses be offset against: a. Short term gains from the current and future years? b. Interest income from fixed deposits in the current and future years? Also, I have filed my returns in time for the year in the which the losses occurred that have been carried forward. However, I was late in filing my return in the subsequent years in which no short term losses occurred. Am I entitled to carry forward the original short term loss for 8 years?
ANSWER
Expert Donna Atkins's Answer:
Short term capital losses resulting from stock sale transactions are carried forward until used (indefinitely).
Net Operating losses (NOL) from operating a business are carried back 2 years and forward 20 years (current rules). NOL's are not a sale and therefore I assume you are inquiring about investment capital losses (not NOL's).
Net short term investment losses that exceed net long term investment gains (and qualifying dividends) are deductible annually up to $3,000; with the excess loss above $3000.00 carried forward to future years. A Schedule D and form 8949 must be filed annually to carryforward the loss (new form for 2011 is the 8949 - prior years schedule D-1) and report current year investment gains/losses. You should be able to carryforward the loss (even on a late filed return) as long as you file the correct forms with your tax return (Schedule D and D-1 or 8949).
Qualifed dividends (from form 1099-Div) and capital gains are deducted from the loss carryforward (on Schedule D). Interest income on fixed deposits is not directly deductible from a capital loss carryforward on schedule D (D-1 and/or 8949), But if your losses on Schedule D exceed your gains, then up to $3000.00 of the excess will be used against your ordinary income (which includes the interest income earned).
