26 U.S.C. § 1211 — Limitation on capital losses

Page 2318 TITLE 26—INTERNAL REVENUE CODE § 1211 SPECIAL RULE FOR PASS-THROUGH ENTITIES Pub. L. 96–222, title I, § 104(a)(2)(C), Apr. 1, 1980, 94 Stat. 215, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘(i) IN GENERAL.—In applying sections [former] 1201(c)(2)(A)(ii) and 1202(c)(1)(B) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] with respect to any pass-through entity, the determination of the period for which gain or loss is properly taken into account shall be made at the entity level. ‘‘(ii) PASS-THROUGH ENTITY DEFINED.—For purposes of clause (i), the term ‘pass-through entity’ means— ‘‘(I) a regulated investment company, ‘‘(II) a real estate investment trust, ‘‘(III) an electing small business corporation, ‘‘(IV) a partnership, ‘‘(V) an estate or trust, and ‘‘(VI) a common trust fund.’’ PART II—TREATMENT OF CAPITAL LOSSES Sec. 1211. Limitation on capital losses. 1212. Capital loss carrybacks and carryovers. Editorial Notes AMENDMENTS 1969—Pub. L. 91–172, title V, § 512(f)(2), Dec. 30, 1969, 83 Stat. 641, substituted ‘‘carrybacks and carryovers’’ for ‘‘carryover’’ in item 1212. § 1211. Limitation on capital losses (a) Corporations In the case of a corporation, losses from sales or exchanges of capital assets shall be allowed only to the extent of gains from such sales or ex- changes. (b) Other taxpayers In the case of a taxpayer other than a corpora- tion, losses from sales or exchanges of capital assets shall be allowed only to the extent of the gains from such sales or exchanges, plus (if such losses exceed such gains) the lower of— (1) $3,000 ($1,500 in the case of a married indi- vidual filing a separate return), or (2) the excess of such losses over such gains. (Aug. 16, 1954, ch. 736, 68A Stat. 321; Pub. L. 91–172, title V, § 513(a), Dec. 30, 1969, 83 Stat. 642; Pub. L. 94–455, title V, § 501(b)(6), title XIV, § 1401(a), (b), Oct. 4, 1976, 90 Stat. 1559, 1731; Pub. L. 95–30, title I, § 102(b)(14), May 23, 1977, 91 Stat. 138; Pub. L. 99–514, title III, § 301(b)(10), Oct. 22, 1986, 100 Stat. 2217.) Editorial Notes AMENDMENTS 1986—Subsec. (b). Pub. L. 99–514 amended subsec. (b) generally, substituting present provisions for provi- sions which had declared in: par. (1), general rule for limitation on capital losses for taxpayer other than corporation; in par. (2), meaning of term ‘‘applicable amount’’; and in par. (3), rule relating to computation of taxable income. 1977—Subsec. (b)(1)(A). Pub. L. 95–30 inserted ‘‘re- duced (but not below zero) by the zero bracket amount’’ after ‘‘taxable year’’. 1976—Subsec. (b)(1)(B). Pub. L. 94–455, § 1401(a), sub- stituted ‘‘the applicable amount’’ for ‘‘$1,000’’. Subsec. (b)(2). Pub. L. 94–455, § 1401(b), substituted provision relating to ‘‘applicable amount’’ for prior provision limiting amount of capital losses for married individuals and reading ‘‘In the case of a husband or wife who files a separate return, the amount specified in paragraph (1)(B) shall be $500 in lieu of $1,000.’’ Subsec. (b)(3). Pub. L. 94–455, § 501(b)(6), struck out last sentence ‘‘If the taxpayer elects to pay the op- tional tax imposed by section 3, ‘taxable income’ as used in this subsection shall read as ‘adjusted gross in- come’.’’ 1969—Subsec. (b). Pub. L. 91–172 provided for only 50 percent of an individual’s long-term capital losses to be offset against his ordinary income up to the $1,000 limit although short-term capital losses continue to be fully deductible within the $1,000 limit and the deduction of capital losses against ordinary income for married per- sons filing separate returns to be limited to $500 for each spouse rather than the $1,000 formerly allowed. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 301(c) of Pub. L. 99–514, set out as a note under section 62 of this title. EFFECTIVE DATE OF 1977 AMENDMENT Amendment by Pub. L. 95–30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95–30, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1976 AMENDMENT Amendment by section 501(b)(6) of Pub. L. 94–455 ap- plicable to taxable years beginning after Dec. 31, 1975, see section 508 of Pub. L. 94–455, set out as a note under section 3 of this title. Pub. L. 94–455, title XIV, § 1401(c), Oct. 4, 1976, 90 Stat. 1731, provided that: ‘‘The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1976.’’ EFFECTIVE DATE OF 1969 AMENDMENT Pub. L. 91–172, title V, § 513(d), Dec. 30, 1969, 83 Stat. 643, provided that: ‘‘The amendments made by this sec- tion [amending this section and sections 1212 and 1222 of this title] shall apply to taxable years beginning after December 31, 1969.’’ § 1212. Capital loss carrybacks and carryovers (a) Corporations (1) In general If a corporation has a net capital loss for any taxable year (hereinafter in this para- graph referred to as the ‘‘loss year’’), the amount thereof shall be— (A) a capital loss carryback to each of the 3 taxable years preceding the loss year, but only to the extent— (i) such loss is not attributable to a for- eign expropriation capital loss, and (ii) the carryback of such loss does not increase or produce a net operating loss (as defined in section 172(c)) for the tax- able year to which it is being carried back; (B) except as provided in subparagraph (C), a capital loss carryover to each of the 5 tax- able years succeeding the loss year; and (C) a capital loss carryover to each of the 10 taxable years succeeding the loss year, but only to the extent such loss is attrib- utable to a foreign expropriation loss, and shall be treated as a short-term capital loss in each such taxable year. The entire amount of the net capital loss for any taxable