Perhaps the best guidance is the form itself and the Capital Loss Carryover Worksheet. Part I of Schedule D is completed first, and Part I relates to short-term capital losses. Line 6 under Part 1 requires that you use the Capital Loss Carryover Worksheet to calculate your short-term capital loss carryover, if any. When lines 1 - 6 under Part I have been completed, they are combined, and the resulting number is entered on line 7 as the net short-term capital gain/loss.
After Part I of Schedule D is completed, then Part II of Schedule D is prepared which relates to long-term capital gains (losses). The process for Part II is similar to the process for Part I and also requires use of the Capital Loss Carryover Worksheet.
As noted in prior posts, the short-term losses and long-term losses are combined on line 16 of Schedule D, but if there were no long-term losses, your short-term losses would then be used to offset any capital gains and if applicable, ordinary income up to the limit.
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