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Self Employed Qualifying Income on 1084 reduced by Capital loss carryover?

I am a self-employed person trying to qualify for a mortgage. I have no debt, literally, no car loan no credit card debt, but a 22 year credit history that includes several large paid off mortgages as well as large balances available on credit cards (I'm using less than 1% of my available credit).

In 2008 and 2009 I had a rather large long term Capital Loss (who didn't?) and it is carried over on my taxes since the IRS won't let you take more than $3,000 a year. Talked to Chase and they said they just take self employed "net" income from line 37 of my returns, period. Yikes! So the Capital loss doesn't matter there. Now a broker tells me that whatever portion of that capital loss is carried over (for tax deduction purposes) will be deducted from my "qualifying" income on the 1084 cash flow analysis. Though when you add back in business use of home, etc. etc. to my income I have a qualifying income of around $74k for 2011 ... I being told that roughly $20,000 will be deducted because of that long term capital loss in 2008 and 2009 .... which also means that 17,000 will be deducted next year etc. etc. Is this correct? It doesn't really affect my "cash flow" at all since I took the beating in 2008 and 2009. Why would it affect my qualifying income in 2010 and 2011??? Help!
  • August 30 2012 - Berkeley
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