Posted on Mon, Nov. 9, 2009
Dear Harry: A while ago, my father took a big hit on the sale of one of his stocks. He had been taking a deduction for that loss on his jointly filed 1040 at the rate of $3,000 a year ever since. He died recently. IRS told me that I can continue to take the loss-carryover deduction only for this year. They also told me that my mother could not continue to deduct the unused balance since the stock was owned by my father. Somehow, I remember that you gave someone a different answer a long time ago. Have things changed? Just what is the current provision? I don't want my mother to have any hassles with IRS. She is a very frail lady with a severe problem with anxiety. Thanks.
What Harry says: Let me review where we stand today. IRS has taken the position that a loss attaches to the individual for this purpose. However, it is not 100 percent clear on this where joint returns are involved. If the stock is jointly owned, the loss carryover would be split evenly between the spouses according to the same IRS provisions. Whenever there is a doubt about the provisions stated by IRS, most CPAs take the position favoring the taxpayer. As a result, even in your case, I would suggest that you continue to carry over the full remaining loss to your mother's return until it's used up. However, you have to consider what the effect of this will be on your mother if IRS questions her return(s).
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