In this tough time, many businesses or individuals are experiencing unfortunate results from their businesses or investment. I hope the following information will give some guideline how thoses losses are reported in their income tax returns.
Net Capital Loss:
Generally, if you had an allowable capital loss in a year, you have to apply it against your taxable capital gains for that year. If you still have a loss, it becomes part of the computation of your net capital loss for the year. You can use a net capital loss to reduce your taxable capital gain in any of the three preceding years or in any future year (unlimited).
Say, in 2008 you have capital losses, but in previous year (2007) you have capital gains. So, you can carry back these losses back against you capital gains. If you still have unused capital losses, you can apply these losses againts future capital gains.
But please be careful of superficial loss rules preventing you from claiming a capital loss on an identical asset that you reacquired 30 days before or after the sale date.
