Change in Capital Loss Carryforward

[JohnH]

Long story, but client produced some additional info this year which caused me to reduce the cost basis on a 2016 transaction which had produced a sizable capital loss.  The result was a change in the capital loss carryforward from 2016 to 2017.  There was no effect on the tax liability for 2016 - only the reduction (less negative) in the available capital loss carryforward.  (Don't we just love Limited Partnerships and the smarmy financial advisors who peddle them to clueless clients?) 

In preparing the 2017 return, I reduced the amount of the loss carryforward on Schedule D line 14 to the correct figure, so the 2017 return shows  a figure which does not agree with the 2016 Schedule D Line 16 adjusted by Line 21. I'm wondering, what's the point in amending the 2016 return?  I know it would be different if the change in the loss carryforward benefitted the client.  But as it is,  I don't really care that the 2016 ending and 2017 beginning figures don't agree, the client doesn't care, and why would IRS care since the loss carryforward is less negative?  I certainly can't find any instructions to amend in this case, although I find an indirect instruction that implies I don't need to amend.  Does anybody have any good reason to suggest amending 2016, aside from OCD? 

 

[Possi]

That happened to me, exactly as you said. I didn't amend anything and never heard from anyone about the change. For what it's worth...

It just didn't make sense to back up the truck when it didn't matter. Kind of like "Whose line is it, anyway" where the points don't matter.

[rfassett]

How does the IRS know what caused the change in numbers?  I get it that the exercise seems bothersome - but I would amend just to put any questions to rest.  I can think of a myriad of items that might affect that carryover - some of which may affect other items on the return and some that may even cause a tax liability.  If I do not tell the IRS about it, they could assume something that is not accurate.  It may never come up - but then it may come up tomorrow.  I would amend and put it to rest.  Or - at the very minimum, a statement should have been attached to the 2017 return explaining the difference between 2016  ending and 2017 beginning numbers.  Just my 2 cents.

[JohnH]

I ran the numbers (via a shortcut), and am positive the change doesn't affect anything on the 2016 return other than the carryforward.  Nothing would ever come of this if the 2016 or 2017 return were audited, aside from validating the year-over-year mismatch.  I didn't think of attaching a statement to the 2017 return, but that's certainly a valid suggestion. 

[Possi]

My client was new to me when it happened. He had over $200k in losses, even after my adjustment. He had been doing it himself and double-hit a figure on year, sending the losses in to 6 figures. I don't recall the exact numbers, but mine was sure not to lift an eyebrow. It reduced his losses which were still unimaginable.

That was about 8 years ago. Never a mention from the IRS.

[BHoffman]

I’ve also had to correct a loss carry forward and just kept a detailed note in the file.  Never came up.  

[JohnH]

(wrong quote. See next message)

 

[JohnH]

24 minutes ago, Possi said:

My client was new to me when it happened. He had over $200k in losses, even after my adjustment. He had been doing it himself and double-hit a figure on year, sending the losses in to 6 figures. I don't recall the exact numbers, but mine was sure not to lift an eyebrow. It reduced his losses which were still unimaginable.

That was about 8 years ago. Never a mention from the IRS.

Wow!  I was adjusting 37K down to $25K.  Compared to yours, mine is little more than a rounding error.