Carry back investment losses

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vtomar
Posts: 28
Joined: Sun Sep 09, 2018 10:41 am

Carry back investment losses

Post by vtomar »

I had a substantial capital loss in 2020 (section 1256) when trading futures. I know that the losses can be carried forward upto 3k per year. But it did seem like we can also carry backwards the losses. I could not find clarity on this on the internet.
  • Is there a limit to how much can be carried backwards per year just like there is a 3k limit per year on carrying forward?
  • How many years backwards can we go to assign the losses?
  • If there is no limit carrying backwards, why would anyone carry forward the losses when there is a limit?
fabdog
Posts: 2543
Joined: Wed Jan 16, 2013 12:59 pm
Location: Williamsburg VA

Re: Carry back investment losses

Post by fabdog »

See form 6781. The instructions are at the bottom of the form. There is an election for carry back of 1256 losses

Box D. Net Section 1256 Contracts Loss Election If you have a net section 1256 contracts loss for 2020, you can elect to carry it back 3 years. Corporations, partnerships, estates, and trusts are not eligible to make this election. Your net section 1256 contracts loss is the smaller of: • The excess of your losses from section 1256 contracts over the total of (a) your gains from section 1256 contracts plus (b) $3,000 ($1,500 if married filing separately), or • The total you would figure as your short-term and long-term capital loss carryovers to 2021 if line 6 of Form 6781 were zero. Use a separate Schedule D (Form 1040) and Capital Loss Carryover Worksheet (in Pub. 550) to figure this amount. The amount you can carry back to any prior year is limited to the smaller of: • The gain, if any, that you would report on line 16 of Schedule D (Form 1040) for that carryback year if only gains and losses from section 1256 contracts were taken into account; or • The gain, if any, reported on line 16 of Schedule D (Form 1040) for that carryback year. The amounts just described are figured prior to any carryback from the loss year. Also, the carryback is allowed only to the extent it doesn’t increase or produce a net operating loss for the carryback year. The loss is carried to the earliest year first. Make the election by checking box D and entering the amount to be carried back on line 6. To carry your loss back, file Form 1045, Application for Tentative Refund, or an amended return. Attach an amended Form 6781 and an amended Schedule D (Form 1040) for the applicable years.

Mike
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