Wayne,
When you carryforward capital losses they are fully deductible against capital gains in future years. The $3000 limit only applies when losses exceed gains and limits what you can deduct from your other regular income. You don't need to be a trader to do this. If you have been only applying $3000 dollars of losses to capital gains in future years and still having a net capital gain for the year, tonyt's advice to file amended returns is correct.
In your earlier example (disregarding whether the losses are long or short term to simplify things), if in 1998 you had $1,000,000 in capital losses with no capital gains to offset them, you can only deduct $3000 of those losses from your AGI in 1998, leaving $997,000 in capital loss carryforwards. If you have $1,000,000 in capital gains in 1999 and no capital losses, the $1,000,000 in capital gain is offset by the $997,000 in capital loss carryforward leaving you with a net capital gain in 1999 of only $3000. Tonyt correctly pointed out that the inequity exists in not being able to use capital losses to look back and offset prior years capital gains. For example if I had $1,000,000 in net capital gains in 1997 and I had $1,000,000 in net capital losses in 1998, it would be nice if I could look back and use those losses to offset all that gain in 1997. But I can't I can only use those losses to offset capital gains in the future and if my losses exceed my gains in the future I can use those capital losses to offset other regular income to the tune of $3000 per year.
I hope this helps,
Jerry |
