The tax law requires that capital gains and losses be separated from other types of gains and losses. Among the reasons for this treatment are:

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Long-term capital gains may benefit from a lower tax rate than ordinary gains. Net capital loss is only deductible up to $3,000 per year for individual taxpayers. Short-term capital losses, on the other hand, can be deducted from short-term capital gains, but any excess is deductible only up to $3,000 per year. Therefore, separating capital gains and losses from other types of gains and losses is necessary.

The Tax Law Requires That Capital Gains and Losses Be