[MWest33330q4CPA]

Regarding Capital Gains and Losses, I understand the netting that occurs between short and long term capital gains and losses. My question is, why even bother with the netting. It seems to me that regardless of short or long term designation, capital gains are taxed at the same rate regardless if they are short or long and capital losses have the same treatment regardless if they are long or short. Does anyone know any reason why we need to go thru the netting process. Is the only difference due to the allocation of the losses first to the 28% tax bracket, then to the 25% tax bracket, etc. How about Personal capital losses, is there any difference there. Thanks to anyone who can help.

[SullivanNJD]

Well, I think you also want to get 1 net capital loss position so you can determine if the 3,000 exclusion applies

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[Anonymous]

Net STCG gets NO favorable tax rate and is taxed @ ordinary income rate

Net LTCG gets the favorable tax rate of 20% max, usually 15%

[PurpleK]

SullivanNJD is on the right track. Netting is very important for figuring out how to carry forward capital losses in excess of $3,000.

For example, say that after you net your long term losses with your short term gains and have a loss greater than $3k, the carry forward of the loss will be long term.

If short term losses are greater than long term gains and total loss is greater than $3k, carry forward of loss will be short term.

If you have both short term losses and long term losses, you are required to use short term losses first for the $3k, anything in excess is carried forward as both short term (assuming you have more than $3k) and long term.

And as chnbsb mentioned above, if short term gain and long term gain, long term gets preferential rates, which can vary from 0% to 20%.

Lastly, losses from personal capital losses are not deductible (so netting not necessary), but sometimes reportable such as real estate.

[ocboa]

Very good explanation

[Author]

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