Recognition
A capital loss is recognized only upon realization – the actual sale or disposal of the asset. Unrealized declines in value (paper losses) are not deductible. The loss must be reported in the annual return for the year it occurs to preserve the right to carry it forward.
Offset Rules
Capital losses offset capital gains only – they cannot reduce ordinary income. Securities losses can offset other capital gains (including real estate gains). The loss can be carried forward indefinitely.
Important Note: The information on this website is for general informational purposes only and does not constitute professional tax advice. Consult a qualified tax advisor before making financial decisions.