Tax Answers

April 09, 1994

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: I have a loss of about $1,000 on a mortgage that I bought. Is this considered to be a capital loss, or can I deduct it on the schedule for capital gains and losses?

A: If the mortgage note is sold instead of collected, the difference between the amount received and the amount used to compute the loss will be a capital loss (unless the note was received for services rendered or a sale of property made in the ordinary course of trade or business.) If the loss is the result of a default and inability to collect the balance, it is a bad debt. A business bad debt is fully deductible as an ordinary loss. A nonbusiness bad debt is treated as a short-term capital loss.

Q: In 1993, I invested in futures in the commodities markets and also in options on futures. I ended the year with some profits but more losses. The bottom line was about a $6,000 combined loss, including commissions. Do the profits and losses have to be itemized, as with stocks? Can I claim any of this loss in 1993, since I don't have any offsetting gains in stock sales, or do I carry the whole loss over? Do the commissions get lumped in with losses?

A: To accurately answer your question, it would be necessary to examine your specific transactions to know how they would be )) handled on your tax returns. You should consult a CPA to help you analyze transactions and properly report them.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

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