You can easily model capital loss carry forwards in Moneytree Plan for the Prosper reports. Prosper first offsets capital gains with any capital losses. It then deducts up to $3,000 of the remaining capital loss from the ordinary income. Afterwards it carries forward any remaining capital loss. This process repeats every year thereafter until the projection depletes the capital loss.
Modeling a Capital Loss Carryforward
To enter a capital loss carry forward:
- Go to the Taxes section, and the Tax Details tab
- Select Schedule D Capital Gain/(Loss)
- Enter the loss as a negative amount under the “Tax Report” column in the Current Year inputs
- In the Future Changes section below enter Individual 1’s age next year with 0 for both dollar amount fields
The program handles everything from there. To review the details and how this will appear in reports keep reading.
Reviewing the Results
Viewing the capital loss carryfoward and the impact on the tax reports requires 3 reports:
- Capital Gain/Loss Carry-Forward (C6a)
- Taxable Income Analysis report (D7)
- Dividend, Capital Gain Sources report (D7a)
To view the loss carryfoward, run the Prosper report. Generating an “Entire” report guarantees you will see all the required pages. The Capital Gain/Loss Carry-Forward (C6a) shows the loss carried forward. Here you can see the full loss entered under column 4, the net loss under column 5, the allowable loss amount in column 6, and the amount carried forward in column 7.
In this example, we can see the manually entered loss of $50,000 in column 4. Reduce that loss by the current year gains of $3,130 seen in column 1. This results in a net loss of $46,870, which shows in column 5. To verify the $3,130 current year capital gains amount, go to the Dividend, Capital Gain Sources report (D7a). The taxable loss for the year is the maximum allowable loss of $3,000 in column 6. Lastly, the program carries forward the remaining portion of the loss of $43,870 ($50,000 loss less current year gains of $3,130 less allowable $3,000 loss equals $43,870).
The Taxable Capital Gain (loss) column 6 will flow through to the Taxable Income Analysis report (D7), column 2. The loss from column 6 of the Capital Gain/Loss Carry-Forward report (C6a) will be summed together with the interest and dividends that are calculated on the Dividend, Capital Gain Sources report (D7a).
For this example, the $1,108 total interest, dividend and capital gain reported on column 2 of the Taxable Income Analysis report (D7) can be broken down in more detail by reviewing the Dividend, Capital Gain Sources report (D7a).
On the Dividend, Capital Gain Sources report (D7a), we see total interest of $1,482 and dividends of $2,626, less the total capital loss from the current year of ($3,000), giving us net interest, dividends and capital gains of $1,108 reported on the Taxable Income Analysis report (D7).
