Can ordinary losses offset capital gains?

Forum|Forum|2 years ago
February 22, 2024
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I've been unable to find a good answer to this question. Can ordinary losses offset capital gains? I know capital losses can only offset capital gains or $3k in ordinary gain, but what about the other way around? The ordinary losses were reported on a Form 4797.

Not A Product Question

Mike9241

yes. A $50K capital gain can be offset by say a $30K nonpassive loss from your sole proprietorship. net $20K Not all ordinary losses can offset since there are special rules as to the deductibility of passive and other losses.

v3ritatisAuthor

Really appreciate your help. Would losses for my day trading as a sole prop count? I have 475(f) MTM for securities. I would like to offset gains from 1256 contracts that have 60/40 capital gains tax. Lets say I have $50K in gains from trading 1256 contracts this year, but $20k in loss from trading securities last year with market to market (losses previously reported on 4797). Would this count as 30k in gains?

RobertB4444

Yes. You said that you have set your day trading up as a sole proprietorship. If that has ordinary losses (and we'll go with your numbers although you didn't include any business expenses there) of $20,000 and then the only other income on your return was $50,000 in ordinary income from short term gains then yes, the net is $30,000 in taxable income.

@v3ritatis

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