Several questions about capital gains for stocks:
A) Is it correct that at the end of the year, all short term losses and gains are combined, and only the resulting total is subject to taxation? Is the $3000 limit only for a rollover to another year?

B) How does the wash rule apply in this case?
400 shares of stock XYZ were purchased originally. 7 weeks later, all 400 shares were sold at a loss. One week later, 204 shares of same stock XYZ were purchased at a much lower price than the previous sale. Three weeks after this second purchase, a portion of the 204 was sold at the lowest price yet for a further loss. Are the 204 shares excluded from the original 400 as capital losses? Can I then claim only 196 as capital losses in the first purchase?

TIA

A) Yes to the first sentence.
Not quite to the second sentence.
If the combined total is a loss, no more than $3000 of that loss is then used to offset ordinary income (non-capital gains) in the current year and then the ENTIRE remaining loss (after subtracting the amount that is claimed in the current year) is then carried over to next year as if it were a new loss in the next year. For example, if your net capital loss is $10,000, then $3000 is used to offset ordinary income (assuming you have at least $3000 in ordinary income) and $7000 is carried over to the next year.

B) Yes and yes.
The loss from the first 204 shares sold is added to the basis of the 204 shares that are purchased one week later. The portion that is sold three weeks later can be claimed as a capital loss (assuming more shares are not purchased within 30 days) and has an increased basis due to the earlier wash sale, resulting in a larger loss.