The tax law requires that capital gains and losses be separated from other types of gains and losses because there are limitations on the deduction of net capital losses.

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This statement is true. Net capital losses can only be deducted up to $3,000 per year against ordinary income. Any excess capital losses can be carried over to future years. Therefore, separating capital gains and losses from other types of gains and losses is important for tax purposes.

The Tax Law Requires That Capital Gains and Losses Be