Which statement about net capital losses is true?

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Multiple Choice

Which statement about net capital losses is true?

Explanation:
Net capital losses are used to reduce taxable income starting with capital gains. If your losses exceed your gains, you can deduct up to $3,000 of the net loss against ordinary income in that tax year (and $1,500 if you’re married filing separately). Any remaining loss can be carried forward to future years, where it again offsets capital gains first and then up to the annual $3,000 limit against ordinary income, continuing until the loss is exhausted. This matches the described process: gains are offset first, then up to $3,000 against ordinary income, with the rest carried forward. The other statements don’t fit because capital losses do offset gains, the ordinary-income offset limit is $3,000 (not $10,000), and losses aren’t deductible as a business expense.

Net capital losses are used to reduce taxable income starting with capital gains. If your losses exceed your gains, you can deduct up to $3,000 of the net loss against ordinary income in that tax year (and $1,500 if you’re married filing separately). Any remaining loss can be carried forward to future years, where it again offsets capital gains first and then up to the annual $3,000 limit against ordinary income, continuing until the loss is exhausted. This matches the described process: gains are offset first, then up to $3,000 against ordinary income, with the rest carried forward. The other statements don’t fit because capital losses do offset gains, the ordinary-income offset limit is $3,000 (not $10,000), and losses aren’t deductible as a business expense.

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