Capital Loss Deduction Against Ordinary Income

§ 1211. Limitation on capital losses(a) CorporationsIn the case of a corporation, losses from sales or exchanges of capital assets shall be allowed only to the extent of gains from such sales or exchanges. (b) Other taxpayersIn the case of a taxpayer other than a corporation, losses from sales or exchanges of capital assets shall be allowed only to the extent of the gains from such sales or exchanges, plus (if such losses exceed such gains) the lower of—(1) $3,000 ($1,500 in the case of a married individual filing a separate return), or (2) the excess of such losses over such gains. (Aug. 16, 1954, ch. 736, 68A Stat. 321; Pub. L. 91–172, title V, § 513(a), Dec. 30, 1969, 83 Stat. 642; Pub. L. 94–455, title V, § 501(b)(6), title XIV, § 1401(a), (b), Oct. 4, 1976, 90 Stat. 1559, 1731; Pub. L. 95–30, title I, § 102(b)(14), May 23, 1977, 91 Stat. 138; Pub. L. 99–514, title III, § 301(b)(10), Oct. 22, 1986, 100 Stat. 2217.) Editorial Notes Amendments1986—Subsec. (b). Pub. L. 99–514 amended subsec. (b) generally, substituting present provisions for provisions which had declared in: par. (1), general rule for limitation on capital losses for taxpayer other than corporation; in par. (2), meaning of term “applicable amount”; and in par. (3), rule relating to computation of taxable income. 1977—Subsec. (b)(1)(A). Pub. L. 95–30 inserted “reduced (but not below zero) by the zero bracket amount” after “taxable year”. 1976—Subsec. (b)(1)(B). Pub. L. 94–455, § 1401(a), substituted “the applicable amount” for “$1,000”. Subsec. (b)(2). Pub. L. 94–455, § 1401(b), substituted provision relating to “applicable amount” for prior provision limiting amount of capital losses for married individuals and reading “In the case of a husband or wife who files a separate return, the amount specified in paragraph (1)(B) shall be $500 in lieu of $1,000.” Subsec. (b)(3). Pub. L. 94–455, § 501(b)(6), struck out last sentence “If the taxpayer elects to pay the optional tax imposed by section 3, ‘taxable income’ as used in this subsection shall read as ‘adjusted gross income’.” 1969—Subsec. (b). Pub. L. 91–172 provided for only 50 percent of an individual’s long-term capital losses to be offset against his ordinary income up to the $1,000 limit although short-term capital losses continue to be fully deductible within the $1,000 limit and the deduction of capital losses against ordinary income for married persons filing separate returns to be limited to $500 for each spouse rather than the $1,000 formerly allowed. Statutory Notes and Related Subsidiaries Effective Date of 1986 AmendmentAmendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 301(c) of Pub. L. 99–514, set out as a note under section 62 of this title. Effective Date of 1977 AmendmentAmendment by Pub. L. 95–30 applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of Pub. L. 95–30, set out as a note under section 1 of this title.