When property is sold for less than the purchase price, this may result in a capital loss that can be used to offset certain types of income on future income tax returns. If not used all in one tax year, the capital loss may carry forward to be used in future tax years. In a 2015 opinion, the Court of Special Appeals decided that a capital loss carry forward, that results from the sale of marital property, is also marital property. Marital property is property acquired during the marriage, with some exceptions. The Court of Special Appeals said: “a capital-loss carry-forward, when generated by a capital loss from the sale of marital property, is itself marital property…” (Baker v. Baker, 221 Md. App. 399, 408 (2015)) and further recognized that: “n the absence of any agreement, the United States Treasury regulations specifically provide that if spouses file separate returns after having previously filed a joint return, any capital-loss carry-forward is ‘allocated to the spouses on the basis of their individual net capital loss which gave rise to such capital loss carryover.’ Treas. Reg. § 1.1212–1(c)(1)(iii)….In other words, if spouses stop filing joint returns, any capital-loss carry-forward is divided between them in proportion to the extent to which their individual losses gave rise to the carry-forward. Id. In the case of jointly-titled assets in which the spouses had an equal interest, this would mean that the carry-forward would be divided equally between them.” (Treasury Regulation § 1.1212–1(c)(1)(iii) (as of 2016) states in full: “If a husband and wife make separate returns for the first taxable year beginning after December 31, 1963, or any prior taxable year, and they made a joint return for the preceding taxable year, any capital loss carryover from such preceding taxable year shall be allocated to the spouses on the basis of their individual net capital loss which gave rise to such capital loss carryover. The capital loss carryover so allocated to each spouse may be carried forward by such spouse to the taxable year in accordance with paragraph (a) or (b) of this section.”) Baker involved a married couple who sold joint investments at a loss, settled their case, and later disagreed about who was entitled to claim what portion of the capital loss carry forward on future individual income tax returns after the divorce. The Court of Special Appeals found that the wife in Baker was entitled to claim one-half of the loss on her future separate income tax returns because the loss resulted from the sale of a joint marital asset. The Baker opinion does not, though, tell us how treat a capital loss carry forward that results from the sale of marital property titled only in one spouse’s name in a divorce case. This involves issues of how to value the capital loss carry forward and account for it in the overall division of property at trial, without a Maryland law or appellate opinion stating exactly how this should be done. However, in settlement, parties can choose their own terms for this situation, opening up many options. Other jurisdictions have considered the issue of loss carryforwards in conjunction with divorce cases. For example: Missouri: Not error to award wife one-half (1/2) of the value of husband’s capital loss carry forward (Mills v. Mills, 663 SW2d 369 (1983)); New York: Capital loss carry forward should have been valued in the amount of taxes spouse would have had for specific tax years (Finkelstein v. Finkelstein, 268 AD2d 273 (2000)); Kentucky: Parties who jointly contributed to investment entitled equally to capital loss carry forward (Smith v. Smith, 235 SW3d 1 (2006)); Florida: Error to award spouse one-half (1/2) of capital loss carry forward when loss arose from non-marital property and spouse had made no special contribution (Haley v. Haley, 936 So.2d 1136 (2006)); Alaska: Not error for court to divide capital loss carry forward between parties 60/40, which was same proportion as division of marital estate (Fortson v. Fortson, 131 P.3d 451) (2006)); Virginia (unreported opinion): $50,000 award for $115,070 in short- and long-term capital loss carry forwards was error because $50,000 was not supported by the evidence, remanded for further calculation of value (Attiliis v. Attiliis, Record No. 1087-08-4, Court of Appeals of Virginia, Alexandria (2009)); and, Oregon: Court offset capital loss carry forward from division of proceeds from future sale of real property (In Re Marriage of Cook, 248 P.3d 420 (2010)). The important point is that a capital loss carry forward may be marital property worth considering in a divorce settlement agreement or raising in a contested divorce trial, with the assistance of an accountant and attorney. It invites valuation, monetary award, and other considerations worth discussing with an experienced family law and divorce attorney.