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To: Chris who wrote (39313)	12/26/2000 2:04:53 PM
From: adcpres	Read Replies (1) \| Respond to of 42787

Chris: (correct me if i am wrong): long term gains can only be deducted with long term loss --- CORRECT GH short term gains can only be deducted with short term loss. --- CORRECT GH but short term losses can deduct ordinary income. -- not quite the whole story. See below (this is why im not a CPA) -ggg- The net LONG and SHORT term GAINS or LOSSES get combined in part 3 of schedule D and transferred over to form 1040 to combine with ordinary income. However, here's the gotcha. ALL of any NET gain from schedule D gets taxed as ordinary income BUT you can only deduct up to $3000 of any NET losses in a given year. You can use the excess losses to offset gains in subsequent years but if you still have a NET LOSS you are still limited to a $3000 deduction in any given year. Get yourself publication 550. It makes for good reading. Make sure you have a bottle of whiskey handy while trying to decipher the tax rules. It has taken me years. LOL

To: Chris who wrote (39313)	12/26/2000 2:55:28 PM
From: Berney	Respond to of 42787

Chris, I think the issue is being made overly complex. Only one gain or loss number comes forward from the Schedule D to the Form 1040. If it is an overall loss, only $3,000 can be deducted with the balance carried over to the future. The reason for separating the capital gains between long term and short term on the Schedule D is that any long term gains are subjected to a preferred tax rate of 20% for those in a 28% tax bracket or above. So, there are four permutations and combinations: 1. Only net Long Term Gains (the Alice in Wonderland scenario): The net gains are taxed at 20% (10% for those in a 15% bracket). 2. Only net Short Term Gains (the Alice in Wonderland Part II scenario): The net gains are taxed as ordinary income. 3. Net Long Term Gains and Net Short Term Losses (Probably see a lot of these): The net short term losses offset the long term gains and the balance: a) if positive, gets taxed at the preferred tax rate, or b) if negative, is deducted to the extent of the $3,000 limitation. 4. Net Long Term Losses and Net Short Term Gains (these folks need to buy a good book on TA): The net long term losses offset the short term gains and the balance: a) if positive, gets taxed as ordinary income, or b) if negative, is deducted to the extent of the $3,000 limitation. Hope this helps, Berney