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In 2008, I had a short-term net capital loss of $2,942 and a long term net capital loss off $3,491 for a total loss of $6433. On line 21 of last year's return, I deducted $3,000 and carried $3,433 into this year's return.

This year I had $458 of short term gains and $4017.20 long term gains for a total of $4,475. On line 14 (long-term capital loss carryover) of this year's return, am I allowed to carry over the entire $3,433 from last year's return to offset my gains? I thought I was only allowed to deduct $3K but maybe that's only when you LOSE more than $3K, not when you're offsetting gains.

You misunderstood the $3,000 limitation, which applies only to the amount carried to line 13 of the 1040. The full amount of your capital loss carryover from 2008 comes to your 2009 Schedule D. Since your 2008 short-term loss was less than $3,000 your entire carryover to 2009 is long-term. You'll see this if you dig up your 2008 return and look at the carryover worksheet.

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