Net losses in a tax year may be carried forward, but not offset against income.
For example, a loss from businesses and investments might offset wages before calculating the taxes due.
If there were never any capital gains, over eight years the entire loss could offset income of $24,000.
So that $24,000 loss would offset only $12,000 of ordinary income.
Usually, if a stock is sold at a loss, that loss will offset gains on other sales.
A loss of independent functions can also offset depression.
Philipp Brothers' losses have significantly offset gains in other divisions.
A loss can offset ordinary income up to $3,000; losses above that level can be carried forward to future years.
Net losses of up to $3,000 can offset ordinary income with any excess carried forward to future years.
So the losses on the short position largely offset the profit on the options trade.