Missing Capital Loss Carryforward

[Patrick Michael]

I'm getting too old to put up with some of these clients!   A client came to me in 2015, and I have been preparing his taxes ever since.  He never had any capital gains in those years;  this year, he has about $20K in gains.  He included a note that, in 2000, he had a million-dollar capital loss carryforward.   The previous preparer did not include the carryforward on his 2014 return, so I did not know about it, and the client never mentioned it until now.  He can't find his 2000 return, and the previous preparer passed away many years ago.  Does the IRS keep track of carryforwards and be able to provide him with the information?  If he can find it, would that amount have to be reduced by the $3,000 he should have taken (I would amend the last three years)?

[Abby Normal]

I'd tell him that unless he has proof of the loss and also proof that it wasn't used up by capital gains in the interim, I can't deduct anything.

I find it hard to believe that any preparer wouldn't be deducting that capital loss every year, and carrying it forward.

[jasdlm]

Agreed.  This sort of reminds me of when clients sell a depreciated asset and bring you all the costs from the first purchase on assuming they're all a deduction against the sale and not realizing they've already taken those deductions.  They just don't understand how it works.

[Patrick Michael]

18 hours ago, Abby Normal said:

I'd tell him that unless he has proof of the loss and also proof that it wasn't used up by capital gains in the interim, I can't deduct anything.

I find it hard to believe that any preparer wouldn't be deducting that capital loss every year, and carrying it forward.

I can believe this particular preparer would miss it.  Many of his former clients came to me after he retired, and I had to correct more than one of his mistakes.  I am pushing back on using it unless he can produce evidence showing that the loss was claimed on a previous return.  I was hoping that the IRS might have a record of it being reported, but I don't know how far back they keep returns.

 

[Abby Normal]

If he was using software, the loss would automatically be carried forward... unless he deleted the Sch D because there were no transactions that year.

Try getting the oldest transcript the IRS has, get a POA for 2000 through now, and maybe call the IRS after tax season.

[jklcpa]

What Abby said, plus if prior preparer changed software providers without conversion, the LTCL c/o entry may have been missed.

[Gail in Virginia]

Even with conversion software, sometimes LTCL and installment sales have to be added manually. 

[Max W]

Copies of tax returns from the IRS are limited to 7 years.    

Might try contacting the retired preparer.   My next door neighbor was a retired tax preparer and when he died all his old record were shredded.

I don't know how far back they went, but the shredder truck was out in front of the house for the better part of the day.  I doesn't hurt to ask.

[DANRVAN]

1 hour ago, Max W said:

Might try contacting the retired preparer.

But OP said he was deceased.

 

On 4/9/2025 at 7:45 AM, Patrick Michael said:

He included a note that, in 2000, he had a million-dollar capital loss

Can he provide any evidence of the transaction?  Courthouse records?  2nd party to the transactions?  Third parties?

[TexTaxToo]

Pub 550

Quote

When you figure the amount of any capital loss carryover to the next year, you must take the current year's allowable deduction into account, whether or not you claimed it and whether or not you filed a return for the current year.

 

[Sara EA]

Definitely don't claim any loss without evidence.  We had a client with a multi-million dollar loss that was used against gains on some of his other endeavors over the years.  Boy was he upset when he had a huge gain and a huge tax bill.  He still had that big loss in his mind and assumed he'd never have to pay taxes again.

[Max W]

6 hours ago, DANRVAN said:

But OP said he was deceased.

 

 

Ah!  Then get out the Ouija Board.

[Patrick Michael]

Thanks everyone.  I think he's out of luck at this point.  He's in the 15% capital gains bracket, so he won't have a huge tax bill.  He informed me this morning that he is out of the stock market as of last week, with a net loss this year, and isn't planning on getting back in.  At $3,000 a year, it will take him about ten years to write off his current loss. 

[mcbreck]

15 hours ago, DANRVAN said:

But OP said he was deceased.

If they are able to take their phone call about a 20 year old tax return - he's in hell.