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Tax Talk with George Saenz

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Offsetting property gains with stock losses

Dear Tax Talk:
I sold a rental property and believe the result is a profit after adding back the depreciation deduction on earlier years. Can I use the loss on the stock that I traded for the gain on selling the rental property?
Thanks,
Dzung

Dear Dzung:
If the rental property was depreciated after 1986, the gain on the property, including the recapture of depreciation, will be considered capital gain. However, for purposes of filling out the tax forms, the gain on the rental property is considered a Section 1231 gain, which simply put is another term for capital gain.

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This gain is considered a long-term capital gain and is transferred to Schedule D capital gains and losses. Short-term and long-term losses from stock trades then can offset the gain on the rental property.

 

-- Posted: Jan. 3, 2002

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See Also
What the IRS says about cashing out of a rental property
Paid points? Check out the tax rules on deducting them

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