ch 12 powerpoint - Chapter 12 Property Transactions...

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1Chapter 12Property Transactions: Treatment of Capital and Section 1231 Assets©2011 CCH. All Rights Reserved.4025 W. Peterson Ave.Chicago, IL 60646-60851 800 248 32481. Capital Assets—Defined2. Determination of Capital Gains and Losses3. Steps to Determine Taxable Income4. Section 1231 AssetsChapter 12 ExhibitsCCH Federal Taxation Comprehensive Topics2 of 245. Determining Section 1231 Gains and Losses6. Recap of the Rules7.Recap of the RulesApplying the Loss Limitation8. Computing Casualty and Theft Losses9. Netting Personal-Use Casualty/Theft Gains/Losses Chapter 12, Exhibit Contents A10. Personal Casualty and Theft Losses 11. Casualty and Theft Losses12. Section 1245 Depreciation Recapture13. Section 1250 Depreciation RecaptureChapter 12 ExhibitsCCH Federal Taxation Comprehensive Topics3 of 24Chapter 12, Exhibit Contents B
2Capital Assets—DefinedCode Sec. 1221 defines capital assets by stating what they are not. “Capital assets” generally refer to any property other than:1.Ordinary income property (inventory, receivables, creative works created by the taxpayer) CCH Federal Taxation Comprehensive Topics4 of 242.Depreciable business property (buildings and machinery)3.Non-depreciable business property (land) Thus, capital assets would include investment property such as stocks and bonds, and personal use assets such as cars, principal residences, household furnishings and jewelry. (Note: Paintings, manuscripts, and other creative works are capital assets if created by someone other than the taxpayer).Chapter 12, Exhibit 1Determination of Capital Gains and LossesLong-term capital gains are taxed up to 15% (0% for individuals in the 10% and 15% tax brackets), except for:Collectibles gains, which are taxed up to 28%CCH Federal Taxation Comprehensive Topics5 of 24Section 1202 gains, which are taxed up to 28% (sale of small business stock held more than 5 years).Un-recaptured Section 1250 gains, which are taxed up to 25%.Chapter 12, Exhibit 2aStep One Group gains or losses into 4 baskets and determine the net amount in each basket.1) Short-term gains/losses.Determination of Capital Gains and LossesCCH Federal Taxation Comprehensive Topics6 of 241) Short term gains/losses.2) 28% long-term gains/losses.3) 25% long-term gains (you will not have losses in this basket).4) 15% long-term gains/losses (including 1231 LT capitalgains)Chapter 12, Exhibit 2b
3Step TwoLong-term net losses from the 28% basket are netted first against gains from the 25% basket and then against gains from the 15% basket.Long-term net losses from the 15% basket are netted fititifth28% bk td thitDetermination of Capital Gains and LossesCCH Federal Taxation Comprehensive Topics7 of 24first against gains from the 28% basket and then against gains from the 25% basket.

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