individual taxpayer may deduct net capital losses against
income in amount up to 3000 per year with any unused capital losses carried forward
when a taxpayer end up with a net losses the offset gains as follows # 1
net short term capital losses first reduce 28 percent gains then 25 percent gains. then regular long term capital gains
when a taxpayer end up with a net losses the offset gains as follows # 2
net long term capital gain losses first reduce 28 percent gain then 25 percent gain , then any short term capital gains
section 1231 asset includes
1. depreciable or real property
2. timber coal or domestic iron ore
3, livestock not includes poultry held for draft
breeding , dairy or sporting purposes .
4. unharvested crops on land used in a trade or
business
if net section 1231 gains exceed the losses
the excess is long term capital gain
when the net section 1231 losses exceed the gains
all gains are treated as ordinary income and all losses are fully deductible as ordinary losses
under the provision of section 1245 any gain recognized on the deposition of a section 1245
asset will be classified as ordinary income up to equal to the deposition claimed
the recomputed basis of an asset is the
adjusted basis of the property plus section 1245 recapture potential
any gain recognized
is excess of the amount of ordinary income is a secton 1231 gain
section 1250 real property recapture is excess of depreciation expense claimed
using an accelerated method of depreciation over what would have been allowed if straight line method was used .
a special 25 or 28.8 percent tax rate applies to real property gains attributable to deprecation
previously taken and not already recaptured under section 1250 or section 1245
on an installment sale the taxable gain is reported each year is determined as follows
1. taxable gain equals total gain realized on sale.
2. divide by the contract price
3. multiple by the payment received during the year.
boot is the money or
fair market value of other property received in addition to the like-kind property
the contract price used is calculate
the taxable gain is the amount the seller will ultimately collect from the purchaser
a realized gain on the involuntary conversion of property occurs
when the taxpayer received proceeds in access of his or her adjusted basis
involuntary conversion gain is not recognized if the proceeds or payment are reinvested
in qualified replacement property within the required time period and the taxpayer makes the proper election