That is not correct. The entity type does matter; if an entity of disregarded it is treated as not existing for tax purposes (hence the label). There is no magical force field that changes the tax treatment of tax items for disregarded or pass through entities.
Net Operating Losses generated in a disregarded entity are passed through to the individual level. You can convert capital losses to NOLs, you can convert gambling losses to NOLs, and a few other conveniences.
Pick whichever source/year combination you choose to respect more. Or present a conflicting source.
No, you have misread your sources. Capital losses offset capital gains, and if any losses remain, up to 3000 can offset any other type of income, which does not require conversion to an NOL.
Corporations can only use capital losses to offset capital gains.
In all cases unused capital losses carry over to future years.
Section 475 elections convert capital losses to NOLs, and therefore information about capital treatment is not relevant or accurate as that is a parallel default tax regime.
Other professions have other elections.
You do the elections at the entity level so as not to mess up your own tax regime.
Instead of your article from 2001, you could pick some part of my articles, such as the parts where it says disregarded or pass through entities work as expected. Your article from 2001 doesn't mention those magic words at all, only discussing partnerships in the non-business tax context.
From my third source using post-2017 tax regime:
> For business losses passed through to individuals from S corporations, partnerships and LLCs that are treated as partnerships for tax purposes, the new excess business loss limitation rules apply at the owner level. In other words, each owner’s allocable share of business income, gain, deduction or loss is passed through to the owner and reported on the owner’s personal federal income tax return for the owner’s tax year that includes the end of the entity’s tax year. [and carried forward to the next year, explained in the following paragraph]
I guess I'll have to tell the partners that some guy on the internet says we've been doing things wrong...
You're still misreading the laws. If you refuse to accept that than we are done. Section 475 are the mark to market rules, not capital gain conversation rules. It applies specifically to dealers of securities (who would otherwise be unable to take deductions for their normal business losses.)
I charge $700/hour. Most of my work now involves cleaning up messes by guys who read one paragraph out of context and got themselves audited when they thought they found a new loophole.
