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It doesn't work quite like that, but close.
We will assume you have no other stock transactions.
In April 2002 you have to file taxes. You lost $10 a share on stock A.
You can take up to $3000 in loss against your ordinary income. So
you take the loss on A, and pay less taxes. You still own B. No taxes
due. If you had more than $3000 in that $10 a share loss, the next
year you can take another $3000 against ordinary income


Thanks for the reply!.

One more qs. Does ordinary income include salary paid by employer. Then since this comes with tax deducted at source, will I need to apply for a rebate while filing taxes ? Or tell my employer about the loss so he does the necessary tax adjustments ? Or carry it over to the next FY ?

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