I guess you still need to pay tax for 2007 realized gain

1. first, this is 2007 calendar year tax, so only tax on realized gain occurred in 2007.

2. For stocks you still hold and now under water in 2008, you may just have unrealized loss. You can't offset with 2007 realized gain.

3. In 2008, if your realized loss is greater than realized gain, then you can carryover the loss for $3000/year.