[YENKO DEUCE REGISTRY]

Chuck is mostly correct. You can deduct capital losses up to the amount of your capital gains plus $3,000 (if MFJ). You may be able to use capital losses that exceed this limit in future years, (called 'carryforward'), however carryforwards have a limited life - you can't carry them forward forever.

The IRS taxes income, not losses. In their mind, it's not their fault you had a loss, so why should they allow a tax deduction for it? The offsetting of cap gains + $3,000, and the carryforward is a concession. This is where tax planning comes into play. Let's say you are going to liquidate some construction assets, and are going to take a bath on them. That would be the time to sell the muscle car, that way you could offset the loss on the equipment against the muscle car gain.

I believe there is a s/t vs. l/t angle to this as well.