Tax Guru – Ker$tetter Letter

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Archive for February 7th, 2008

Capital gains double standard…

Posted by taxguru on February 7, 2008

Q:

Subject: Re: INFLATION ADJUSTMENTS [LACK THEREOF]

Dear Tax Guru Blog,

Kerry, since I’ve only been a CPA since 1990, I asked an “old-timer” how long the $3,000 capital loss per annum limitation has been in place…
yes, that’s right… since 1951.
I don’t know a way to verify this, I just wanted you know how ridiculous the term of this limitation has been. Feel free to cut loose on a rant about this; because, as we know, this never hurts wall street insiders or white collar slicksters, it only hurts the working class, the weak, and the elderly.

Here’s wishing you and yours the best of health,

A:

I’ve done more than my share of ranting about this extremely unfair double standard in the tax code over the past decades.

I’m not sure about that 1951 starting date. My recollection of when I started preparing tax returns in the mid 1970s was that the annual limit was only $1,000 per person; but I can’t lay my hands on a full history of this idiotic rule right now.

The aspect of this that has always fried me the most was the fact that unused capital loss carry forwards evaporate upon death. I have written on a few occasions about a client who was in his 80s and had almost a million dollars of stock market losses that I knew would end up going to waste at the measly $3,000 per year rate of use. He passed away in the middle of 2007 and I have had to break the news to his heirs that those unused losses are gone forever as well.

Unfortunately, we don’t hear any of our supreme rulers in DC mentioning changing any part of this ridiculous rule; so we’ll just have to continue living with it for the foreseeable future.

Thanks for writing and good luck with this tax season.

Kerry Kerstetter

TaxCoach Software: Finally! Plain-English Tax Planing That Builds Your Business!

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A vicious cycle…

Posted by taxguru on February 7, 2008

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