Chapter 8 Property Transactions - Chapter 8 Property...

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Chapter 8 Property Transactions:Capital Gains and Losses, Section 1231, andRecapture ProvisionsCaptial Transactions – General RemarksoThe code makes a distinctions between personal-use capital assets andbusiness use capital assets, giving preferential tax treatment to transactionsinvolving business-use capital assets.oPersonal-use capital assets are commonly referred to as simply “Capital Assets”oBusiness-use capital assets are commonly referred to as “1231 Property”oGeneral Rules:Capital Asset TransactionsGains:either ordinary income (short term) or capital gains (subjectto lower tax rates)Losses: capital losses (only first 3000 can be used each year withthe carried forward indefinitely)1231 Property TransactionGains: capital gains (subject to lower tax rates)Losses: ordinary losses (can be deducted against ordinary incomewithout limits)Capital Assets – DefinedoCapital assets generally refer to any property other than:Ordinary income property (inventory, receivables, creative works createdby taxpayer)Depreciable business property (building and machinery)Non-depreciable business property (land) (1231 asset)oThus, capital assets would include investment property such as stocks andbonds, and personal use assets such as cars, principal residences, household

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Term
Fall
Professor
fabioambrosio
Tags
Accounting, Business, Capital gains tax in the United States

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