A "net capital gain" results if the taxpayer has net long-term capital gains in excess of net short-term capital losses for the year.
Short-term capital losses, including short-term capital loss carryovers, are first applied to reduce short-term capital gains.
Similar to annuity trusts, unitrusts reported unusually large net short-term capital losses
Example 3: The facts are the same in Example 1, except that the trading activity produced $200,000 of short-term capital losses instead of gains.
However, Trader 2 can deduct the entire amount of short-term capital losses ($200,000), resulting in a significant reduction in AGI and greater use of itemized deductions, because of a reduction in the Sec.
Individual taxpayers may deduct two different types of bad debts: business bad debts, which are deductible as ordinary losses if completely or partially worthless, and nonbusiness bad debts, which are short-term capital losses
taken only when entirely worthless.
The Tax Court held that the doctor was an investor, not a professional money lender; thus, the losses were nonbusiness bad debts and short-term capital losses
Furthermore, up to $3,000 ($1,500 if married filing separately) of excess long or short-term capital losses
can be used to offset ordinary income from such sources as your job or bank interest.
Business bad debts that are completely or partially worthless are deductible as ordinary losses, while nonbusiness bad debts are short-term capital losses
only when entirely worthless.