but only to the extent of gains from such sales or exchanges of capital assets in such taxable year.
The amount by which the net long-term capital losses carried to the taxable year from taxable years beginning before January 1, 1970, exceeds the sum of (a) plus (b) shall constitute the transitional net long-term capital loss component for the taxable year for the purpose of this subparagraph.
then such excess shall constitute the transitional net short-term capital loss component for the taxable year, and to the extent such component also exceeds the net short-term capital loss applied to the additional allowance (as provided in subparagraphs (2) and (4)(i) of this paragraph) or the transitional additional allowance (as provided by subdivision (i) of this subparagraph and subparagraph (4)(i) of this paragraph) for the taxable year shall be carried to the succeeding taxable year as short-term capital losses from taxable years beginning before January 1, 1970, for utilization in such succeeding taxable year in the computation of the additional allowance (as provided by subparagraph (2) of this paragraph) or the transitional additional allowance (as provided by subdivision (i) and (ii) of this subparagraph). In no event, however, shall the amount of such component so carried to the following taxable year as otherwise provided by this subdivision exceed the total of net short-term capital losses actually carried to such succeeding taxable year pursuant to section 1212(b) and § 1.1212-1(b) .
Taxable income exclusive of capital gains and losses | $4,400 | |
Deduction provided by section 151 | 625 | |
Taxable income for purposes of section 1211(b) | 5,025 | |
Long-term capital gain | $1,200 | |
Long-term capital loss | (5,300) | |
Net long-term capital loss | (4,100) | |
Losses to the extent of gains | (1,200) | |
Additional allowance deductible under section 1211(b) | 1,000 |
The net long-term capital loss of $4,100 is deductible in 1970 only to the extent of an additional allowance of $1,000 which is smaller than the taxable income of $5,025. Under section 1211(b) and subparagraph (2) of this paragraph, $2,000 of excess net long-term capital loss was required to produce the $1,000 additional allowance. Therefore, a net long-term capital loss of $2,100 ($4,100 minus $2,000) is carried over under section 1212(b) to the succeeding taxable year. If A had the same taxable income for purposes of section 1211(b) (after reduction by the zero bracket amount) and the same transactions in 1977, the additional allowance would be $2,000, and a net long-term capital loss of $100 would be carried over. For a taxable year beginning in 1978 or thereafter, these facts would give rise to a $2,050 additional allowance and no carryover.
Taxable income exclusive of capital gains and losses | $90 | |
Deduction provided by section 151 | 625 | |
Taxable income for purposes of section 1211(b) | 715 | |
Long-term capital gain | $1,200 | |
Long-term capital loss | (5,200) | |
Net long-term capital loss | (4,000) | |
Losses to the extent of gains | (1,200) | |
Additional allowance deductible under section 1211(b) | 715 |
The net long-term capital loss of $4,000 is deductible in 1970 only to the extent of an additional allowance of $715, since the $715 of taxable income for purposes of section 1211(b) is smaller than $1,000. Under section 1211(b) and subparagraph (2) of this paragraph, $1,430 of net long-term capital loss was required to produce the $715 additional allowance. Therefore, a net long-term capital loss of $2,570 ($4,000 minus $1,430) is carried over under section 1212(b) to the succeeding taxable year. For illustration of the result if the net capital loss for the taxable year is smaller than both $1,000 and taxable income for the purposes of section 1211(b), see examples (3) and (4) of this subparagraph. For carryover of a net capital loss, see § 1.1212-1 . Assuming the same taxable income for purposes of section 1211(b) (after reduction by the zero bracket amount) and the same transations for taxable years beginning in 1977 or thereafter, the same result would be reached.
Taxable income exclusive of capital gains and losses | $13,300 | |
Deduction provided by section 151 | 675 | |
Taxable income for purposes of section 1211(b) | 13,975 | |
Long-term capital gain | $400 | |
Long-term capital loss | ($600) | |
Net long-term capital loss | (200) | |
Short-term capital gain | 900 | |
Short-term capital loss | (1,400) | |
Net short-term capital loss | (500) | |
Losses to extent of gains | (1,300) | |
Additional allowance deductible under section 1211(b) | $600 |
The $600 additional allowance deductible under section 1211(b) is the least of:
Taxable income exclusive of capital gains and losses | $12,000 | |
Deduction provided by section 151 | 675 | |
Taxable income for purposes of section 1211(b) | 12,675 | |
Long-term capital loss | ($800) | |
Long-term capital gain | 300 | |
Net long-term capital loss | (500) | |
Short-term capital loss | (500) | |
Short-term capital gain | 600 | |
Net short-term capital gain | 100 | |
Losses to the extent of gains | (900) | |
Additional allowance deductible under section 1211(b) | 200 |
The excess net long-term capital loss of $400 (net long-term capital loss of $500 minus net short-term capital gain of $100) is deductible in 1971 only to the extent of an additional allowance of $200 (one-half of $400) which is smaller than both $500 (married taxpayer filing a separate return for a taxable year beginning after December 31, 1969) and taxable income for purposes of section 1211(b). Since there is no net short-term capital loss in excess of net long-term capital gains for the taxable year, the $200 additional allowance deductible under section 1211(b) consists entirely of excess net long-term capital loss. No amount of net capital loss remains to be carried over under section 1212(b) to the succeeding taxable year. Assuming the same taxable income for purposes of section 1211(b) (after reduction by the zero bracket amount) and the same transactions for taxable years beginning in 1977 or thereafter, the result would remain unchanged.
Taxable income exclusive of capital gains and losses | $13,300 | |
Deduction provided by section 151 | 625 | |
Taxable income for purposes of section 1211(b) | 13,925 | |
Long-term capital loss | ($6,000) | |
Long-term capital gain | 2,000 | |
Net long-term capital loss | (4,000) | |
Short-term capital gain | 3,000 | |
Short-term capital loss carried to 1970 from 1969 under section 1212(b)(1) | (3,000) | |
Net short-term capital loss | 0 | |
Losses to the extent of gains | (5,000) | |
Additional allowance deductible under section 1211(b) | 1,000 |
The $1,000 additional allowance deductible under section 1211(b) is the least of (i) taxable income of $13,925, (ii) $1,000, or (iii) the sum of the net short-term capital loss ($0) plus one-half of the net long-term capital loss of $4,000. The $1,000 additional allowance, therefore, consists of net long-term capital loss. Since $2,000 of the net long-term capital loss of $4,000 was required to produce the $1,000 additional allowance, the $2,000 balance of the net long-term capital loss is carried over under section 1212(b) to 1971. Assuming the same taxable income for purposes of section 1211(b) (after reduction by the zero bracket amount) and the same transactions for taxable years beginning in 1977 or thereafter, the additional allowance would be $2,000, and there would be no carryover.
Taxable income exclusive of capital gains and losses | $13,300 | |
Deduction provided by section 151 | 625 | |
Taxable income for purposes of section 1211(b) | 13,925 | |
Long-term capital gain | $5,000 | |
Long-term capital loss | (7,000) | |
Long-term capital loss carried to 1970 from 1969 under section 1212 (b)(1) | (500) | |
Net long-term capital Loss | (2,500) | |
Short-term capital gain | 1,100 | |
Short-term capital loss | (1,400) | |
Net short-term capital loss | (300) | |
Losses to extent of gains | (6,100) | |
Transitional additional allowance deductible under section 1211(b) | 1,000 |
Because a component of the net long-term capital loss for 1970 is a $500 long-term capital loss carried to 1970 from 1969, the transitional additional allowance deductible under section 1211(b) and subparagraph (3) of this paragraph is the least of (i) taxable income of $13,925, (ii) $1,000 or (iii) the sum of the net short-term capital loss of $300, plus the net long-term capital loss for 1970, to the extent of the $500 long-term capital loss carried to 1970 from 1969 and one-half of the $2,000 balance of the net long-term capital loss. The entire $500 long-term capital loss carried to 1970 from 1969 is applicable in full to the transitional additional allowance because there was no net capital gain (capital gain net income for taxable years beginning after December 31, 1976) actually realized in 1970. The $1,000 transitional additional allowance, therefore, consists of the net short-term capital loss of $300, the $500 long-term capital loss carried to 1970 from 1969, plus one-half of enough of the balance of the 1970 net long-term capital loss ($400) to make up the $200 balance of the $1,000 transitional additional allowance. A long-term capital loss of $1,600 ($2,500 minus $900), all of which is attributable to 1970, is carried over under section 1212(b) to 1971. Assuming the same taxable income for purposes of section 1211(b) (after reduction by the zero bracket amount) and the same transactions for taxable years beginning in 1977 or thereafter, the transitional additional allowance would be $1,800. No amount would remain to be carried over to the succeeding taxable year.
Taxable income exclusive of capital gains and losses | $13,300 | |
Deduction provided by section 151 | 625 | |
Taxable income for purposes of section 1211(b) | 13,925 | |
Long-term capital loss | ($2,000) | |
Long-term capital loss carried to 1970 from 1969 under section 1212 (b)(1) | (500) | |
Net long-term capital loss | (2,500) | |
Short-term capital gain | 2,600 | |
Short-term capital loss carried to 1970 from 1969 under section 1212 (b)(1) | (3,000) | |
Net short-term capital loss | (400) | |
Losses to the extent of gains | (2,600) | |
Transitional additional allowance deductible under section 1211(b) | 1,000 |
Because a component of the net long-term capital loss for 1970 is a $500 long-term capital loss carried to 1970 from 1969, the transitional additional allowance deductible under section 1211(b) and subparagraph (3) of this paragraph is the least of (i) taxable income of $13,925, (ii) $1,000, or (iii) the sum of the net short-term capital loss of $400, plus the net long-term capital loss for 1970 to the extent of the $500 long-term capital loss carried to 1970 from 1969, and one-half of the $2,000 balance of the net long-term capital loss. The entire $500 long-term capital loss carried to 1970 from 1969 is applicable in full to the transitional additional allowance because the net capital gain (capital gain net income for taxable years beginning after December 31, 1976) for the taxable year (computed without regard to capital losses carried to the taxable year) consisted entirely of net short-term capital gain not in excess of the short-term capital loss carried to 1970 from 1969. The $1,000 transitional additional allowance, therefore, consists of the net short-term capital loss of $400, the $500 long-term capital loss carried to 1970 from 1969, plus one-half of enough of the balance of the 1970 net long-term capital loss ($200) to make up the $100 balance of the $1,000 transitional additional allowance. A long-term capital loss of $1,800 ($2,500 minus $700), all of which is attributable to 1970, is carried over under section 1212(b) to 1971. Assuming the same taxable income for purposes of section 1211(b) (after reduction by the zero bracket amount) and the same transactions for taxable years beginning in 1977 or thereafter, the transitional additional allowance would be $1,900. No amount would remain to be carried over to the succeeding taxable year.
Taxable income exclusive of capital gains and losses | $10,000 | |
Deductions provided by section 151 | 675 | |
Taxable income for purposes of section 1211(b) | 10,675 | |
Long-term capital gain | $2,500 | |
Long-term capital loss treated under § 1.1211-1 (b)(3)(iii) as carried over from 1969 | (5,000) | |
Net long-term capital loss | (2,500) | |
Short-term capital gain | 2,700 | |
Short-term capital loss carried to 1971 from 1970 under section 1212 (b)(1) | (1,000) | |
Short-term capital loss treated under § 1.1211-1 (b)(3)(iv) as carried over from 1969 | ($2,000) | |
Net short-term capital loss | (300) | |
Losses to extent of gain | (5,200) | |
Transitional additional allowance deductible under section 1211(b) | 1,000 |
Because a component of the net long-term capital loss for 1971 is a long-term capital loss treated under subparagraph (3)(iii) of this paragraph as carried over from 1969, the rules for computation of the transitional additional allowance under subparagraph (3) (i) and (ii) of this paragraph apply. The transitional net long-term capital loss component for 1971 under subparagraph (3)(ii) of this paragraph is $1,800, that is, the amount by which the $5,000 long-term loss treated as carried over from 1969 to 1971 exceeds (a) the net long-term capital gain of $2,500 actually realized in 1971 plus (b) the $700 excess of the $2,700 net short-term capital gain actually realized in 1971 over the $2,000 short-term capital loss treated as carried over to 1971 from 1969. The transitional additional allowance for 1971 consists of the $300 net short-term capital loss plus $700 of the net long-term capital loss attributable to 1969. A net long-term capital loss of $1,800 ($2,500 minus $700) is carried over to 1972 under section 1212(b). Only $1,100 of the $1,800 will be treated in 1972 as carried over from 1969 since under subparagraph (3)(iii) of this paragraph the transitional net long-term capital loss component of $1,800 is reduced by the amount ($700) applied to the transitional additional allowance for 1971. Assuming the same taxable income for purposes of section 1211(b) (after reduction by the zero bracket amount) and the same transactions for a taxable year beginning in 1977, the transitional additional allowance would be $2,000. A net long-term capital loss of $800 would remain to be carried over. Of this amount $100 would be treated as carried over from 1969. Assuming the original facts for a taxable year beginning in 1978, the transitional additional allowance would be $2,450. No amount would remain to be carried over to the succeeding taxable year.
26 C.F.R. §1.1211-1