Your answer is somewhere between your two scenarios. You can only carried forward any loss over $3,000, not carry over $3,000. For example, assuming you sold the gains in 2014:
- You would claim your $20,000 losses in 2013. However, only $3,000 would be deductible.
- The remaining $17,000 in losses would carry forward to 2014. With $10,000 in 2014 gains and $17,000 in carry forward losses, you would have a net 2014 loss of $7,000. Of that, you would get the tax benefit of $3,000 and carry forward the excess $4,000 to 2015.
Any excess capital loss can be carried over until you die, then it is lost and of no benefit to your estate or heirs.
