chapter 3 capital gains and losses

chapter 3 capital gains and losses - -If one category is a...

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Chapter 3 – Capital Gains and Losses Step 1: Categorize each disposition as short-term or long-term. (long-term means the taxpayer held the asset for more than 12 months). Step 2: Eliminate any personal losses, as these are non-deductible. Step 3: Further separate the long-term gains/(losses) into two categories: long-term collectibles (like coins and stamps) and long-term assets that are not collectibles. Step 4: Net each of the three categories (the short-term category; the long-term collectible category; and the long-term assets that are not collectibles category). Step 5: Choose one of the following based upon the results of step 4: - If all net losses , add together. If the sum of all of the losses is greater than $3,000, deduct $3,000 in the current year and carry the remaining forward to next year.
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Unformatted text preview: -If one category is a loss and the others are gains , net the loss category against the gain category with the highest tax rate. If any loss is left-over, apply the remainder to the other gain category. If more loss is still left over, you may deduct up to $3,000 of this remainder against ordinary income on your return and carryforward the rest to next year. -If two categories are losses and the other is a gain , use the short-term losses against the gain category first, then the other loss against the remaining gain. If any loss exists after netting against the gain, it is limited to $3,000 against ordinary income, carrying forward the excess to future years. -If all categories are gains , keep them separated, as different tax rates will apply....
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