Tax Facts

7930 / How are a RIC’s capital losses treated?

Prior to 2010, a RIC could carry a net capital loss that was not deductible in the current tax year as a short-term capital loss for only eight years. After December 22, 2010, however, a RIC is generally permitted to carry a capital loss forward indefinitely, though special rules now apply in determining the character of the loss as long-term or short-term capital loss.

The loss that is carried forward will be treated as a short-term capital loss if the RIC’s short-term capital losses for the year exceed its long-term capital gains. If long-term capital losses exceed short-term capital gains for the year, the loss is treated as a long-term capital loss.1

A capital loss cannot be carried back to a year in which a corporation is a RIC.2

1. IRC § 1212(a)(3)(A).

2. IRC § 1212(a)(4).

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