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T11FChp-11-3D-Depreciation Recapture Summary

T11FChp-11-3D-Depreciation Recapture Summary - Page 1 of 1...

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d74ff0670bc1d9b7c825891a75b1c4f926ba7989.doc. Page 1 of 1 We Like Capital Gains and Hate Capital Losses Corporations get no current tax benefit from losses (often incurred in recessions and depressions) if those losses are classified as capital losses. Capital loss deductions for individuals are also limited. Congress was helpful, by stating in Section 1221 that land, buildings, equipment, etc. used in a business are not capital assets. This means that losses on those assets are fully deductible, because those losses are not capital losses. [Text pages ___________________________] Corporations have a different view in good times when they are realizing gains on sale of such assets. They would like for those gains to be capital gains so they can be offset by their accumulated capital loss carryovers. Individuals have essentially the same concerns, and in addition individuals use very low tax rates on long- term capital gains. Corporation do not have preferential capital gains rates. Congress to the Rescue Congress went further to make both individuals and corporations happy, by saying you can “have your cake and eat it too!” [Text page _________] [Be Patient; We have Section 1221 defining capital assets to exclude business property. Then Section 1231 making an exception to Section 1221 (by allowing
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