In December 2010 The Sarasota Herald Tribune published my version of the top 10 Screwiest Tax Provisions.

 We have been updating that list here:

 Screwy income tax provision – #8

 Tax Planning: Deducting Capital Losses

The annual capital-loss limitation is $3,000. This one has been around for a long time and  never made any sense. You have to pay tax on all your gains when you sell stock, but only can deduct $3,000 in any single year when you sell at a loss.

If you have a large carry forward capital loss which you are having trouble using there are things you can do before December 31.

  • If you have an impending sale of real property which will result in a significant capital gain to you see what can be done to move up the closing date to 2014.
  • If you are holding various publicly traded securities which have significant unrealized gains consider selling them.  Then re-purchase the same stock after 30 days.  That way you can net the capital gain against your current accumulated capital losses and thus reduce your tax burden.  Also you may l avoid a huge tax in the future when you do permanently dispose of the subject securities.
  • Consider shifting your dividend generating portfolio to stocks which generate capital gain dividends.

Warning:  Do not make any decisions as noted above without conferring with your tax specialist and/or your investment advisor.  Your particular situation may not exactly fit these simple examples.