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If I am sitting on $10,000 of losses carried over from the previous year, and this year I sell stock at a gain of $5000, which of the following scenarios applies?:

1. The $5000 gain is offset by the $10,000 that I am already sitting on, so I will still be able to offset my income by $3000, but my carryover for next year will be $2000 ($10,000 - $5000 gain - $3000 that I can charge against my income this year)

2. The $5000 gain is offset by only $3000 for this year, and I will be taxed for the other $2000. My carryover for next year will be $7000.

3. Something else?

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