@Kr_W said "It seems to me, what really determines your carry over loss for that year in which you have only capital gains in income is not the first two lines of your carry over loss worksheet, but line 9 of the carry over worksheet?"
No. There are two separate calculations going on. The first is that your current year capital gains (and losses) MUST be combined with your capital loss carry over from the previous year. You must do this regradless of how low your other income or your total imcome is. This is true even if your income is so low that none of it is taxable. This calculation is done on Schedule D, not the carry forward work sheet. If you still have net capital loss, on Schedule D, that loss (up to $3000) will go on line 7 of form 1040. If your net loss is more than $3000, or the loss on line 7 is not fully used to reduce your taxable income, the carry over worksheet will be generated.
Using your example: $5500 on line 13 of Schedule D, $8000 on line 14, leaving you with $2500 net loss. That $2500 is not neccessarily you carry over. First the $2500 must go to form 1040 to determine your taxable income. If not needed, then the $2500 is your carry over.
Q. So how can one carry forward ALL “carry over loss” with low income?
A. You can't, if any of that "low income" is capital gains (including capital gains distributions from mutual funds).
