if I have passive losses that I can not take (suspended losses), will they be netted from my capital gains and losses.

Hey Brian. I have not heard that question before, but it is a very good question. Capital losses and passive losses are separate categories and they are not netted. If you look on the passive activity loss schedule on form 8582, it does not take into consideration capital gains or losses.

Remember, capital gains and losses are subject to preferential tax treatment. Passive activity losses are subject to phaseouts because passive losses are deemed to be a tax shelter.

So, in the end, if you have carryforward capital losses, they can not be used to offset passive activity income.

Great question. Let me know if you have any other questions.