Question

"Capital Gain or Loss from Assets Acquired After Decemer 21, 2011"

Forum|Forum|5 years ago
February 4, 2021
4 replies
0 views

While in Easy Step mode TT shows the message above and asks to "Enter the portion of gain or loss from assets acquired after December 31, 2011". It also shows a long-term capital loss of -99,349 which looks like a carryover from prior years. This comes up while starting my Arizona State taxes. Any ideas what this means? Thank you.

T

ThomasM125

You are being asked to enter the portion of any gains or losses reported on your federal tax return during the current year that were from the disposition of assets purchased or acquired after December 21, 2011. It looks like you have a capital loss carryover from previous years, so you need to see what portion of that appears on your federal tax return this year and if it was from assets acquired after December 21, 2011, you should report that amount.

Capital losses on your federal return are limited to $3,000 per year, so if you didn't sell anything in 2020, your loss is probably that amount.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

B

bstevens33Author

My capital loss on line 7, Form 1040 is -$3,000. Some of my mutual fund sales in 2020 were acquired after Dec. 21, 2011. Do I report the loss for 2020 as a negative number when responding to this TT query? Presumably yes since it's a loss. Without the carry-over loss from previous years my sales in 2020 are gains. So my question is do I report the situation before the prior year carry-overs were applied or after?

Thank you to ThomasM125 for the previous response.

T

ThomasM125

If you only had gains in 2020, then the $3,000 loss was from sales reported in previous years. So, you need to see if those sales were from assets acquired December 31, 2011. If so, then you would most likely be reporting -$3,000, or $3,000 as a negative number.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

M

mettleurgist

I am getting the same question in my Turbotax Arizona State filing. I have a long-term capital gain of $50,000. This is all from actively managed mutual funds that I have held for years (some before 2011). All of them have their dividends reinvested. I have never sold/exchanged anything in them over the years; I have occasionally added to them. This $50,000 amount is essentially the long-term cap gains for the active fund manager making trades.

So my question is - am I supposed to go back through all the dividend reinvestments and my purchases over the years until 2011? Or do I enter the entire amount of $50,000 since this is this year's long-term cap gains from fund manager trading and dividend reinvesting?

Thanks.

Z

zhaos172002

I have the same question, my 2020 options trade positive, do I enter that amount here?

M

mettleurgist

I did some further research on this question. From an aztax-aide.org posting (https://aztax-aide.org/wp-content/uploads/2020/11/Net-Long-Term-Gain-2020-11-16.pdf?6cc19a&6cc19a) I found that Short Term transactions (gains?) nor dividend distributions are not to be included. Don't know if this would also include reinvested dividends - if so, this becomes a much more difficult computation.

Here is the relevant text from the posting:

"Arizona provides a reduction of 25% of the net Long-Term Capital Gains received from assets
acquired after 12/31/2011 and included in the Federal Adjusted Gross Income (AGI). This credit
is shown on page 1, line 23 of AZ-140.

There is no reduction necessary if the Net Capital Gain for assets acquired after 12/31/2011 is a
loss reported as a reduction of Federal Adjusted Gross Income.

To calculate the Net Long Term Capital Gain, you must review the taxpayers broker statement
detail of Long-Term transactions and net the Gains against the Losses. Only include transactions
where the acquisition date can be verified on the brokers statement.

Do not include Short Term transactions nor Dividend distributions. Neither are subject to the
25% reduction. For assets acquired by Gift or Inheritance, the acquisition date is the date the
asset was acquired by the original owner."

I then saw a posting in the Bogelheads forum (https://www.bogleheads.org/forum/viewtopic.php?t=205727) - search for "December" - there will be 6 occurrences - go to the last 2 occurrences for the post of interest:

"Note that AZ offers a subtraction of 25% of the LTCGs generated on shares purchased after 12/31/2011. For example, if you hold a fund which was purchased after that date or to which you added shares after that date from reinvested divs and cap gains, you can subtract 25% of the cap gains paid out on those shares whether it is from a cap gain distribution or a redemption. From the AZ Form 140 Inst:
You may subtract 25% (.25) of any net long-term capital gain included in your federal adjusted gross income that is derived from an investment in an asset acquired after December 31, 2011. Use the worksheet on page 29 of these instructions, Worksheet for Net Long-Term Capital Gain Subtraction for Assets Acquired after December 31, 2011, to determine the allowable subtraction. Keep the worksheet for your records.
Assume you have a fund for which reports 8000 of cap gains or your sale produces a LT cap gain of 8000. Half the shares were purchased prior to 2012 and half after that date. Therefore 4000 of your cap gains are eligible for subtraction. 25% of 4000 = 1,000. which shows as a subtraction on your AZ 140. Effectively, this reduces the rate you pay on these gains by 25% regardless of which marginal bracket you are in. If it is the 4% bracket, then you actual rate becomes 3%."

I had found an older (I think 2016) AZ tax form (perhaps 140PY?) that had instructions & guidance on this (can't find the document anymore) - it specifically said that in the case of mutual funds, where the specific shares being sold/bought could not be determined, they could not be claimed for this LT Cap Gain reduction.

I decided to enter zero in my tax form as it is the safest option.

T

Taxedout7700

Can this line item include long term gains from mutual funds acquired and sold after 12/31/2011? Can Total Capital Gain Distributions be pro-rated between the proportion held before and after 12/31/2011 so that the later amount is included in this line item?

A

AZtaxquestions

In 2020 I had a Futures 1256 contract loss of -92000 so with the 60/40 tax rule -55200 was the long-term capital loss and -36800 as a short-term capital gains loss. In the Federal Section TurboTax has been deducting the 3000 standard deduction amounts for 2020, 2021, and now 2022 from the short-term capital gains loss and carrying the rest forward.

This prompts the AZ state tax return to enter Capital Gain or Loss each year from Assets Acquired After December 31, 2011. Until the amount is gone should I enter negative -55200 each year unless there are gains to offset it? The instructions are so poor on TurboTax for this field I am afraid I have been doing it wrong and would like precise detail on what to enter in this field and if TurboTax requires further calculations. This field gives me great anxiety every year and I wish TurboTax would improve the info with some examples. I could really use the help of an expert please. Also, if there is an AZ TurboTax CPA, I can talk to about this specific issue that would be nice as a bonus for peace of mind. By the number of posts, I think many others would agree this needs more detail and attention in TurboTax. Thank you very much looking forward to hearing everyone's input on the negative capital gain how-to.

A

AZtaxquestions

I do not have a carryback. I just want to know is AZ if you have a long-term capital loss carry forward and you know the entire amount occurred after December 31, 2011 does the state of AZ and TurboTax just want you to reenter that same negative number each year assuming you do not have gains to offset it? So, if the box says you have -53000 in long term gains that occurred in 2012 and beyond do you just copy that same negative number into the TurboTax box each hear verbatim? This assumes there is no long-term capital gains offsetting it. In laymen terms is TurboTax and the AZ140 just using this for line 22 that I think this populates correct me if I am wrong with tracking of long-term capital loss carry forwards, in the case you have a loss?