Investment Losses

Heads they win, tails we lose! “They” are the government, and “we” are the taxpaying citizens.

Congress has loudly publicized its intent that the income tax laws be fair and equitable. Yet, there is a gross inequity in the present law, which severely and unfairly penalizes investors. I am referring to the $3,000 annual limitation on capital losses.

There are 2,500 investors who have lost much, if not all, of their life savings invested in the now-bankrupt Pioneer Mortgage Co. in San Diego. This company had been a very reputable business here for 20 years. But, in 1990, due to gross mismanagement, most of the funds invested in real estate trust deeds through Pioneer are now lost. The total could reach $200 million!

Most Pioneer investors will never have any future capital gains against which to offset these huge losses--they have no investment money left. Because present law allows the deduction of only $3,000 of the loss each year, very few will live long enough to get full tax credit for their loss. Since investors pay tax on the full amount of the capital gains they make over the years in order to accumulate their after-tax life savings, the $3,000 annual limit on investment loss is patently unfair and inequitable.

To be fair, the law should allow investors to deduct enough of their net loss each year so they pay no tax until the total amount of their loss is “recovered.”

Rep. Robert K. Dornan (R-Garden Grove) introduced H.R. 2286, which would accomplish this fair and reasonable goal. The bill is now lodged in the House Ways and Means Committee. I urge all citizens to ask their representatives to co-sponsor H.R. 2286 and work to incorporate it in the tax law changes now being developed by the Congress.

RALPH PETERS, Encinitas