The capital loss would be included in the computation of his New York state income tax.

FORBES: New York Toys With Out Of State Partner

Your income tax expense under GAAP is a make-believe computation.

FORBES: How Double Taxed Are Investors ?

It may appear that ramping up your hours to materially participate in an activity is a no-brainer, because by converting the activity from passive to nonpassive, you can pull the resulting income out of the computation of net investment income and save an extra 3.8% in tax.

FORBES: Overview Of The New 3.8% Investment Income Tax, Part 2: Passive Activities