Part of the carried over loss is used to offset ordinary income (not capital gains) each year. That's why Critter had trouble understanding your statement that your friend "never used or needed the remaining loss." "Is this a problem?" Yes. "Something he should have done" is carry over the loss each year and show it on his tax return. It's not "fully documented" if he didn't do that.
He cannot just take the loss that remained in 2007 and use that amount on his 2015 tax return. He has to recalculate each year's tax return from 2008 through 2014 with the loss carryover to determine how much is still remaining after 2014. The capital loss carryover from 2014 is what he can use on his 2015 tax return.
He should file amended returns for 2012, 2013, and 2014 if there is still a carryover in those years. He may get additional refunds because the loss carryover will reduce his taxable income. His tax might have been lower in 2008 through 2011 if he had properly carried over the loss, but it's too late to get refunds for years earlier than 2012 now.
