Outline_2A_Capital_gains_and_section_1231

Outline_2A_Capital_gains_and_section_1231 - Table 5-1...

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Table 5-1 Capital or Ordinary Gains and Losses From Sales and Exchanges of Property If you sell— Your gain is— Your loss is— Reported on— INVESTMENTS: Stocks, mutual funds, bonds, land Collectibles: art, gems, stamps, and coins held for investment are capital assets but taxed at maximum 28percent Business inventory held for sale to customers. Also, accounts or notes receivable acquired in the ordinary course of business or from the sale of inventory or property held for sale to customers, or acquired for services as an employee. Capital gain. Holding period determines short-term or long-term gain treatment (5.3). Security traders may report ordinary income and loss under a mark-to-market election (30.17). Ordinary income. Such property is excluded by law from the definition of capital assets. Capital loss. Capital losses are deductible from capital gains with only $3,000 of any excess deductible from ordinary income, $1,500 if married filing separately (5.4). Ordinary loss. Ordinary loss is not subject to the $3,000 deduction limit imposed on capital losses. However, passive loss restrictions, may defer the time when certain ordinary losses are deductible. Schedule D. However, if the only amounts you have to report on Schedule D are mutual-fund capital gain distributions, then you may report the distributions directly on Form 1040A or Form 1040 (32.8). Form 4797 for gains and losses of a trader in securities who makes the mark-to-market election (30.17). Schedule C if self-employed; ScForm 1065 for a business operated as a partnership. Depreciable residential rental property or Depreciable real property used in a business or LAND or Depreciable personal property used in a business (e.g.) trucks, autos, computers, machinery, fixtures, or equipment used in your business. Capital gain or ordinary income. Section 1231 determines whether gain is taxable as ordinary income or capital gain (44.8). Net gains are treated as capital gains. Gains on depreciable personal property are subject to 1245 depreciation recapture. Recaptured depreciation is ordinary income. Ordinary losses if there is a net Section 1231 loss {44.8). Form 4797 for Section 1231 transactions. Personal-use property. \ E.G. Personal residence, car, jewelry, furniture, art objects, and coin or stamp collection held for personal use. Capital gain. See the holding period rules that determine short-term or long-term gain treatment and the preferential tax rates applied to net long- term capital gains (5.3). Where an asset such as an auto or residence is used partly for personal purposes and partly for business or rental purposes, the asset is treated as two separate assets for purposes of figuring gain or loss (44.9). Tax on all or part of a profit from a sale of a principal residence may be avoided; see Chapter 29. Not deductible. Losses on as- Schedule D sets held for personal use are not deductible although profits are taxable.
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Outline 2A PROPERTY TRANSACTIONS: CHARACTER OF GAINS AND LOSSES February 7, 2011 Read Nolo Press pages 46 bottom to 52 Read Chapter 7 Section 7.2 Problems: 35 and 36 Read Chapter 16 pages 1 to 7 bottom), Section 16.3 to Example 11, 16.4 through
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