Capital Gains and Losses Flashcards
How are self created musical works treated?
-As capital assets
What is holding period of stocks and securities acquired by purchase?
-Begins on trade date purchased and ends on trade date sold
What’s the holding period for an asset where basis is determined by basis of old asset?
-Holding period of old asset tacks on
What’s the automatic holding period for non business bad debts?
-Short term
How are short term capital gain distributions from a mutual fund treated?
-As ordinary income not included in netting process
What’s the order for the netting process?
- Net all STCG/L then all LTCG/L
- Then net both
How do individuals treat net capital losses?
- Deduct up to $3,000 per year for AGI and limited to taxable income
- If MFS, limited to $1,500
- Carry forward indefinitely, but not back
LTCL’s carried forward offset capital gains in what order?
- Capital gains taxed at 28%
- Capital gains taxed at 25%
- Capital gains taxed at 20% (or 15% for some taxpayers)
If combination results in net STCG, net LTCG, what is the tax treatment?
- Net STCG: Taxed as ordinary income
- Net LTCG: Taxed as capital gain (may receive preferential tax treatment)
Is dividend income included in the netting process?
No
What is the net LTCG rate?
- 39.6% ordinary income taxpayers: 20%
- 15% or lower ordinary income taxpayers: 0%
- All others: 15%
Describe the 3.8% net investment income tax.
- Applies to taxpayers w/ AGI over $250,000 MFJ or $200,000 Single/HOH
- Applies to lesser of NII or AGI over thresholds
What is the maximum tax rate for net capital gain from “collectibles”?
28%
What is a collectible?
-Tangible personalty such as coins, art, antiques, gold, silver purchased for investment purposes
Describe the exclusion for Qualifying small business stock.
- Eligible for 50% exclusion, rest taxed at max rate of 28% for avg tax rate of 14%
- Corporation less than $50 million in capital, held for more than 5 years
- Maximum gain eligible for exclusion is greater of 10x basis or $10 million in aggregate
Describe the special treatment of Section 1244 stock.
- Gains treated as regular capital gains but losses may be treated as ordinary to maximum of $100,000 MFJ or $50,000 for others
- Domestic small business corporation
- Capital receipts do not exceed $1,000,000 at time stock is issued
- Must be original holder of stock
How do you treat losses on on options due to lapse of option?
-Same way as underlying asset
What are the tax rates for STCGs and LTCGs for corporations?
-Same as ordinary income rates
