Losses arising on the sale or exchange of capital assets. Individuals, trusts and estates can deduct capital losses only to the extent of capital gains, plus ordinary income of up to $3,000. Any unused capital losses are carried forward to future tax years until the losses are used. A corporation can only deduct capital losses against capital gains. A corporation can carry back any unused capital losses to the three tax years preceding the loss year, and carry forward any unused capital losses to the five tax years following the loss year.

For more on capital loss treatment, see Practice Notes, Taxation of Corporations and Preferred Stock in Private Equity Transactions: Significant Tax Issues: Capital Gains and Losses.