OAR 150-316-0006: Application of Capital Losses and Capital Loss Carryforwards

(1) Part-year resident and nonresident returns. (a) A nonresident is allowed a capital loss or capital loss carryforward on the Oregon return when attributable to Oregon sources. (b) A part-year resident is allowed a capital loss or capital loss carryforward on the Oregon return if the loss was incurred while a nonresident and is attributable to Oregon sources or if the loss was incurred while a resident. (c) The amount of the capital loss or capital loss carryforward that is not attributable to Oregon sources may not be included as Oregon taxable income on the Oregon tax return. The capital loss or capital loss carryforward not attributable to Oregon sources cannot be used to reduce a capital gain attributable to Oregon sources. Example 1 : Taxpayer is an Arizona resident and incurs a capital loss from Oregon sources. Taxpayer is allowed the capital loss to determine Oregon taxable income. Example 2 : Taxpayer moves to Oregon and becomes a resident as of June 1. Prior to becoming a resident, taxpayer incurs a non-Oregon source capital loss of $50,000. Taxpayer is allowed to deduct a $3,000 loss on the federal return. Taxpayer may not include the $3,000 loss in the Oregon column on the Oregon return. Example 3 : The same scenario as example 2, except taxpayer recognizes a capital gain of $70,000 as of August 1. On the federal return, taxpayer offsets the $70,000 gain with the $50,000 loss for a net gain of $20,000. The $50,000 loss may not be included in Oregon taxable income and may not be used to offset the capital gain recognized while the taxpayer was an Oregon resident. (2) Full-year resident return. (a) A resident is allowed a capital loss or capital loss carryforward on the Oregon return if the loss was incurred while a nonresident and was attributable to Oregon sources or if the loss was incurred while a resident. (b) The amount of capital loss or capital loss carryforward that is not attributable to Oregon sources is added back on the Oregon tax return when determining Oregon taxable income. The capital loss or capital loss carryforward not attributable to Oregon sources cannot be used to reduce a capital gain attributable to Oregon sources and is added back on the Oregon tax return when determining Oregon taxable income. Example 4 : In tax year 2017, taxpayer is a nonresident and incurs a non-Oregon source capital loss of $50,000 and has a $47,000 carryforward. As of January 1, 2018, taxpayer is a full-year Oregon resident. Taxpayer claims a $3,000 loss on the 2018 federal return attributable to the $47,000 capital loss carryforward. Taxpayer must add back the $3,000 loss on the Oregon return to determine Oregon taxable income. Example 5 : The same scenario as example 4, except on March 5, 2018, taxpayer recognizes a $100,000 capital gain. On the 2018 federal return, taxpayer offsets the $100,000 gain with the $47,000 capital loss carryforward for a net gain of $53,000 on the federal return. The $47,000 capital loss carryforward must be added back on the 2018 Oregon return to determine Oregon taxable income.