Updated October 17, 2026. Quick answer: Code L goes in column (f) of Form 8949 for a loss you cannot deduct, other than a wash sale loss, which uses code W. You report the sale on the form and enter the amount of the nondeductible loss as a positive number in column (g), so that the loss is cancelled out. The Schedule D instructions list the related-party sales that are the usual cause.
What code L means
The column (f) table row for L reads “You have a nondeductible loss other than a loss indicated by code W”. Wash sale losses have their own code, covered on Form 8949 code W and on the wash sale rule page. Everything else that the tax rules disallow belongs under L.
The form’s own column (f) heading is short: the 2025 Form 8949 says “If you enter an amount in column (g), enter a code in column (f).” So a nondeductible loss needs both the code and the amount.
What to enter in column (g)
The table says “Report the sale or exchange on Form 8949 and enter the amount of the nondeductible loss as a positive number in column (g).” The Schedule D instructions repeat it for a related-party loss: “Because the loss isn’t deductible, enter “L” in column (f).” “Complete column (h).”
If a row needs two codes, the instructions say “If more than one code applies, enter all the codes that apply in alphabetical order (for example, “BOQ”).” “Don’t separate the codes by a space or comma.” For the net adjustment they say “If you entered more than one code in column (f) on the same row, enter the net adjustment in column (g).”
Sales between related parties
The Schedule D instructions explain the most common source: “You can’t deduct a loss from a sale or exchange between certain related parties.” “This includes a direct or indirect sale or exchange of property between any of the following.”
- “Members of a family.”
- “A corporation and an individual who directly (or indirectly) owns more than 50% of the corporation’s stock (unless the loss is from a distribution in complete liquidation of a corporation).”
- “A grantor and a fiduciary of a trust.”
- “A fiduciary and a beneficiary of the same trust.”
- “An executor of an estate and a beneficiary of that estate, unless the sale or exchange was to satisfy a pecuniary bequest (that is, a bequest of a sum of money).”
- “An individual and a tax-exempt organization controlled directly (or indirectly) by the individual or the individual’s family.”
For more on this, the instructions say “See Pub. 544 for more details on sales and exchanges between related parties.”
The IRS examples
The first Schedule D example is a sale to a relative: “You sold land you held as an investment for 5 years to your brother for $10,000.” “Your basis was $15,000.” “On Part II of Form 8949, check box F or box L at the top.” “Enter $10,000 on Form 8949, Part II, column (d).” “Enter $15,000 in column (e).” “Because the loss isn’t deductible, enter “L” in column (f) and $5,000 (the difference between $10,000 and $15,000) in column (g).”
A second example involves a broker form: “Box 7 on Form 1099-B or box 5 on Form 1099-DA is checked, indicating that your loss of $4,000 isn’t allowed.” “Enter $1,000 in column (d) and $5,000 in column (e).” “Because the loss isn’t deductible, enter “L” in column (f) and $4,000 (the difference between $1,000 and $5,000) in column (g).” Box choices are explained on Form 8949 boxes A to L.
Where it goes next
With the positive adjustment in column (g), column (h) comes out to zero in the examples above.
Column (h) is the result. The instructions say “First, subtract the cost or other basis in column (e) from the proceeds (sales price) in column (d).” “Then take into account any adjustments in column (g).” “Enter the gain (or loss) in column (h).”
Form 8949 feeds the Schedule D. The instructions open with “Complete Form 8949 before you complete lines 1b, 2, 3, 8b, 9, or 10 of Schedule D.” They also say “Include on your Schedule D the totals from all your Parts I and II.” The totals line at the bottom of Part I tells you to “Enter each total here and include on your Schedule D, line 1b (if Box A or Box G above is checked), line 2 (if Box B or Box H above is checked), or line 3 (if Box C or Box I above is checked)”. Part II says to “include on your Schedule D, line 8b (if Box D or Box J above is checked), line 9 (if Box E or Box K above is checked), or line 10 (if Box F or Box L above is checked)”. The Schedule D itself is explained on the Schedule D page, and the full set of form instructions is on Form 8949 instructions.
Edition and line numbers
This page reads the 2025 Form 8949 and its 2025 instructions, along with the 2025 Schedule D instructions where cited, the current files irs.gov served on 2026-10-17. They are the forms for the tax year 2025 return, filed in 2026. Check the tax year printed on the form you are filling in and use the column letters and codes on that year’s form, because a different year’s form can letter its columns or word its codes differently.
Common mistakes
- Entering the nondeductible loss as a negative number in column (g). The instructions say “enter the amount of the nondeductible loss as a positive number in column (g).”
- Using code L for a wash sale. The code L row says “You have a nondeductible loss other than a loss indicated by code W”, so a wash sale loss takes code W.
- Dropping a related-party loss from the return because it is not deductible. The Schedule D instructions say “Report a transaction that results in a nondeductible loss in Part I or Part II of Form 8949 (depending on how long you held the property).”
Related: Form 8949 instructions, Schedule D, Wash sale rule, and Capital loss harvest helper.
Sources
- Instructions for Form 8949 (2025): https://www.irs.gov/pub/irs-pdf/i8949.pdf
- Form 8949 (2025): https://www.irs.gov/pub/irs-pdf/f8949.pdf
- Instructions for Schedule D (Form 1040) (2025): https://www.irs.gov/pub/irs-pdf/i1040sd.pdf
Read from the IRS documents linked above on October 17, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.