Losses on the sale of capital assets held for personal use are not deductible. But if the loss is on the sale or exchange of real estate, and you receive a Form 1099-S, you have to report the transaction on Schedule D for informational purposes, even though you cannot deduct the loss.
Related Parties
Generally, losses from the direct or indirect sale or exchange of personal, investment, or business property between related parties are not deductible. For this purpose, related parties include members of a family; a corporation and a person who owns more than 50% of the stock; grantors, fiduciaries and beneficiaries of a trust; the executor and beneficiary of an estate; and an individual and a tax-exempt organization controlled by the individual or the individual's family.
At-Risk and Passive Activity Rules
If you dispose of an asset from an activity that is subject to the at-risk rules and you have a loss, you may need to complete Form 6198, At Risk Limitations, to determine how much of the loss is deductible. Then, if the loss is deductible under the at-risk rules, it may be subject to the limitations on passive activity losses. You may have to file Form 8582, Passive Activity Loss Limitations.
Capital Losses
If your capital losses are more than your capital gains, you can claim a capital loss deduction. The allowable capital loss deduction, figured on Schedule D, is the lesser of the actual net loss or the yearly limit ($3,000, or $1,500 if married filing separately).
Loss Carryovers
If your actual net loss is more than the limit, you can carry over the unused part of the loss 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. The loss that you carry over retains its status as either a long-term or short-term loss.