I am not sure if the answer below is directly responsive to the question you want answered but here goes:
Section 1231 net gains are treated as capital gains provided the assets are held for more than one year. Capital losses can be used to offset capital gains and up to $3,000 of net capital losses can be used to offset all other income.
However, losses from passive activities cannot be used to offset capital gains nor other types of income. Such losses are suspended and can only be used to offset passive income per Section 469 (until sold to an unrelated third party in a fully taxable transaction).
