Capital loss carryovers reported on Schedule D are included with your tax return until the loss is used up, either by reducing your taxable income or netted against capital gains. You can deduct up to $3,000 in capital losses each year ($1,500 if you're married filing separately).
The Capital Loss Carryover amount appears with Schedule D on the Capital Loss Carryover Worksheet, which is included when you print or save worksheets with your return.
Distributions in excess of basis are considered ordinary income and would not directly offset a capital loss carryover. Your total taxable income would be reduced by the allowable capital losses.
Capital Loss Carryovers in General:
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