Article
Source: Journal of Taxation
Article
01.10.19
Unlike capital losses, which can be used to offset only capital gains,1 ordinary losses can be used to offset both ordinary income and capital gains.2 With respect to income, because of the rate differential between ordinary income and capital gain, the government takes a much bigger piece of an individual taxpayer’s ordinary income pie than of than of an individual taxpayer’s capital gains pie.3 All other things being equal, then, individual taxpayers prefer ordinary losses to capital losses and capital gains to ordinary income.4
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