Does the $3,000 annual capital loss limitation mean you can only use
$3,000 of your carryover losses each year?  For example, if you lose
$50,000 in 2005 and deduct $3,000 of it on your taxes. For 2006, if
you have a capital gain of $75,000, can you deduct the remaining $47,000 from
the carryover loss towards it or just $3,000 of it? Please include
sources. Thank you.

Yes, according to the IRS you are able to deduct the remainder of your
carryover loss from the capital gain.  In this case, since the capital
gain exceeds the capital loss, you will be able to conduct all of the
remaining $47,000.

Sincerely,

Wonko

Source:

"Capital loss carryover.  If you have a total net loss on line 16 of
Schedule D that is more than the yearly limit on capital loss
deductions, you can carry over the unused part to the next year and
treat it as if you had incurred it in that next year.  If part of the
loss is still unused, you can carry it over to later years until it is
completely used up.

When you figure the amount of any capital loss carryover to the next
year, you must take the current year's allowable deduction into
account, whether or not you claimed it.

When you carry over a loss, it remains long-term or short-term.  A
long-term capital loss you carry over to the next tax year will reduce
that year's long-term capital gains before reduces that year's
short-term capital gains."

"Publication 550 Investment Income and Expenses " Internal Revenue
Service (2005) http://www.irs.gov/pub/irs-pdf/p550.pdf page 66

Search terms: deduct capital loss carryover

Great Answer. Thank You.