does capital loss carry over when FTC zeros out US taxes?

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steadgarwin
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Joined: Mon Apr 27, 2015 10:52 pm

does capital loss carry over when FTC zeros out US taxes?

Post by steadgarwin »

I am a CAD resident and In a prior year I had a capital loss on my US tax return. In the same year I naturally had no US tax due to FTC (in fact a US tax credit). Does the capital loss carry forward, or is it considered "used" by the IRS?

Or does the IRS apply the capital loss first, then the FTC -- in which the the capital loss is used?
nelsona
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Post by nelsona »

Unfortunately, the capital loss goes on line 13 of 1040 in the year it occurred (upto $1500 per person) and continues to be carried forward on schedule D until used up at $1500 per year per person.

So your gains will never be subjected to US tax (thus no need for FTC) until the loss is used up. You should however continue to file passive 1116 to accumulate foreign passive tax, in case you should ever need it.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
kev_indigo
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Joined: Fri Apr 17, 2015 4:18 pm
Location: Canada

Post by kev_indigo »

If I am not mistaken, the $1500 per person per year rule applies if your filing status is married filing separately. All other filing status situations are allowed to take up to $3000 loss per year on Sch D Line 21 and Form 1040 Line 13. Personally, I file single status and take the full $3000 loss on Line 13.
whiterhino
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Joined: Sun Feb 18, 2018 3:53 pm

Post by whiterhino »

My understanding of the passive 1116 filings is that the FTCs can never exceed the U.S. tax liability, and you must take into account standard deduction in figuring that liability. So what’s the advantage of passive 1116 filings if your U.S. tax liability is already reduced by the standard deduction?
nelsona
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Post by nelsona »

That is the same for all types of 1116s. If your tax liability is already ero, then you are simply carrying forward the credit. This happens all the time.

Not really what was discussed here, though.

And, yes, kev, the $3000 applies to singles as well, Thanks for the clarification.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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