© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 2 Introduction to Capital Gains and Losses So You Sold Some Property … ... (continued)
Jan 04, 2016
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 2
Introduction to Capital Gainsand Losses
So YouSold SomeProperty … ...
(continued)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 3
II. Other Information Needed?
B A
III.III. Holding Period
A. Short-term
B. Long-term
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 4
Handout Part 2Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT) of capital gain or loss realized.
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 5
Handout Part 2Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
Sales Price xxxx
Basis xxxx
+ Gift Tax xx xx
Gain or (Loss) xxx
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 6
Handout Part 2 -- 1)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
Sales Price
Basis 11,000
+ Gift Tax xxx
Gain or (Loss)
13,000
1,950
50 11,050
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 7
Handout Part 2 -- 1)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
Sales Price
Basis 11,000
+ Gift Tax xxx
Gain or (Loss)
13,000
1,950
50 11,050LT
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 8
Handout Part 2 -- 3)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
Sales Price
Basis
+ Gift Tax
Gain or (Loss)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 9
Handout Part 2 -- 3)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
Sales Price 9,000
Basis 1?,000
+ Gift Tax 0
Gain or (Loss)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 10
Handout Part 2 -- 3)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
Sales Price 9,000
Basis 10,000
+ Gift Tax 0 10,000
Gain or (Loss)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 11
Handout Part 2 -- 3)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
Sales Price 9,000
Basis 10,000
+ Gift Tax 0 10,000
Gain or (Loss) (1,000)
ST or LT?
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 12
Handout Part 2 -- 3)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
1974 1/8 2/14
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 13
Handout Part 2 -- 3)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
1974 1/8 2/14
A B C
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 14
Handout Part 2 -- 3)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
1974 1/8 2/14
A B C
$11,000 $10,000 $9,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 15
Handout Part 2 -- 3)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
Sales Price 9,000
Basis 10,000
+ Gift Tax 0 10,000
Gain or (Loss) (1,000)
ST or LT?
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 16
Handout Part 2 -- 3)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
Sales Price 9,000
Basis 10,000
+ Gift Tax 0 10,000
Gain or (Loss) (1,000)
ST
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 17
Handout Part 2 -- 3)Assume that on February 14 of the current year, a donee sold an investment property she had received as a gift on January 8. The donor had purchased the property on October 26, 1974. State the amount and class (ST or LT ) of capital gain or loss realized.
1974 1/8 2/14
A B C
$11,000 $10,000 $9,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 18
Classifying TransactionsMake Two Piles
ST LT
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 19
Classifying TransactionsSum Each of the Piles
ST LT
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 20
ST LT
Classifying TransactionsName the Two Results
NLTCG(L)NSTCG(L)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 21
Classifying TransactionsCombine the Two Results?
NLTCG(L)NSTCG(L)
+G +G- L - L
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 22
Classifying Transactions
NLTCG(L)NSTCG(L)
+G +G
Don’t Combine the Two Results
Don’t
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 23
Classifying Transactions
NLTCG(L)NSTCG(L)
-L -L
Don’t Combine the Two Results
Don’t
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 24
Classifying TransactionsCombine the Two Results
NLTCG(L)NSTCG(L)
+G -LNet Net
Net
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 25
Classifying TransactionsCombine the Two Results
NLTCG(L)NSTCG(L)
-L +GNet Net
Net
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 26
Problem 5-48, page 5-45
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 27
Problem 5-48, Situation 1
AGI
ST
<ST>
LT
<LT>
$40,000
6,000
(2,000)
3,500
(2,500)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 28
Problem 5-48, Situation 1
AGI
ST
<ST>
LT
<LT>
$40,000
6,000
(2,000)
3,500
(2,500)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 29
Problem 5-48, Situation 1
AGI
ST
<ST>
LT
<LT>
$40,000
6,000
(2,000)
3,500
(2,500)
4,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 30
Problem 5-48, Situation 1
AGI
ST
<ST>
LT
<LT>
$40,000
6,000
(2,000)
3,500
(2,500)
4,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 31
Problem 5-48, Situation 1
AGI
ST
<ST>
LT
<LT>
$40,000
6,000
(2,000)
3,500
(2,500)
4,000
1,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 32
Problem 5-48, Situation 1
AGI
ST
<ST>
LT
<LT>
$40,000
6,000
(2,000)
3,500
(2,500)
4,000
1,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 33
Problem 5-48, Situation 1
AGI
ST
<ST>
LT
<LT>
$40,000
6,000
(2,000)
3,500
(2,500)
4,000
1,000
$40,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 34
Problem 5-48, Situation 1
AGI
ST
<ST>
LT
<LT>
$40,000
6,000
(2,000)
3,500
(2,500)
4,000
1,000
$40,000
4,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 35
Problem 5-48, Situation 1
AGI
ST
<ST>
LT
<LT>
$40,000
6,000
(2,000)
3,500
(2,500)
4,000
1,000
$40,000
4,000
1,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 36
Problem 5-48, Situation 1
AGI
ST
<ST>
LT
<LT>
$40,000
6,000
(2,000)
3,500
(2,500)
4,000
1,000
$40,000
4,000
1,000
$45,000AGI (after)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 37
Problem 5-48, Situation 1
AGI
ST
<ST>
LT
<LT>
$40,000
6,000
(2,000)
3,500
(2,500)
4,000
1,000
$40,000
4,000
1,000
$45,000AGI (after)
*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 38
Special Treatmentof Long-Term Gains
1954 1986 1997
LTCGD alternate tax rate
reduced rates**
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 39
Problem 5-48, Situation 2
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 40
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 41
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 42
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
(3,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 43
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
(3,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 44
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
(3,000)
11,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 45
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
(3,000)
11,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 46
Classifying TransactionsCombine the Two Results
NLTCG(L)NSTCG(L)
-L +GNet Net
Net
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 47
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
(3,000)
11,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 48
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
(3,000)
11,0008,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 49
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
(3,000)
11,000
$50,000
8,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 50
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
(3,000)
11,000
$50,000
8,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 51
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
(3,000)
11,000
$50,000
8,000 8,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 52
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
(3,000)
11,000
$50,000
8,000
$58,000AGI (after)
8,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 53
Problem 5-48, Situation 2
AGI
ST
<ST>
LT
<LT>
$50,000
2,000
(5,000)
15,000
(4,000)
(3,000)
11,000
$50,000
8,000
$58,000AGI (after)
8,000*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 54
NCG
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 55
Net Capital Gainexcess of LT gains
over ST losses
LTG- STL
NCG*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 56
Skip Situation 3
Go to Situation 4
Slide 78
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 57
Problem 5-48, Situation 3
AGI
ST
<ST>
LT
<LT>
$60,000
5,000
(4,000)
10,000
(12,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 58
Problem 5-48, Situation 3
AGI
ST
<ST>
LT
<LT>
$60,000
5,000
(4,000)
10,000
(12,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 59
Problem 5-48, Situation 3
AGI
ST
<ST>
LT
<LT>
$60,000
5,000
(4,000)
10,000
(12,000)
1,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 60
Problem 5-48, Situation 3
AGI
ST
<ST>
LT
<LT>
$60,000
5,000
(4,000)
10,000
(12,000)
1,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 61
Problem 5-48, Situation 3
AGI
ST
<ST>
LT
<LT>
$60,000
5,000
(4,000)
10,000
(12,000)
1,000
(2,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 62
Problem 5-48, Situation 3
AGI
ST
<ST>
LT
<LT>
$60,000
5,000
(4,000)
10,000
(12,000)
1,000
(2,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 63
Problem 5-48, Situation 3
AGI
ST
<ST>
LT
<LT>
$60,000
5,000
(4,000)
10,000
(12,000)
1,000
(2,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 64
Problem 5-48, Situation 3
AGI
ST
<ST>
LT
<LT>
$60,000
5,000
(4,000)
10,000
(12,000)
1,000
(2,000)(1,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 65
Problem 5-48, Situation 3
AGI
ST
<ST>
LT
<LT>
$60,000
5,000
(4,000)
10,000
(12,000)
1,000
(2,000)
$60,000
(1,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 66
Problem 5-48, Situation 3
AGI
ST
<ST>
LT
<LT>
$60,000
5,000
(4,000)
10,000
(12,000)
1,000
(2,000)
$60,000
(1,000) (1,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 67
Problem 5-48, Situation 3
AGI
ST
<ST>
LT
<LT>
$60,000
5,000
(4,000)
10,000
(12,000)
1,000
(2,000)
$60,000
(1,000)
$59,000AGI (after)
(1,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 68
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 69
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 70
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 71
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 72
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 73
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 74
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000(4,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 75
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000
$70,000
(4,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 76
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000
$70,000
(4,000) (3,000)(Annual maximum)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 77
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000
$70,000
(4,000)
$67,000AGI (after)
(3,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 78
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000
$70,000
(4,000)
$67,000AGI (after)
(3,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 79
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000
$70,000
(4,000)
$67,000AGI (after)
(3,000)
Carryover = ? ? ? ?
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 80
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000
$70,000
(4,000)
$67,000AGI (after)
(3,000)
STCL Carryover = $1,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 81
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000
$70,000
(4,000)
$67,000AGI (after)
(3,000)
STCL Carryover = $1,000
How long?
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 82
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000
$70,000
(4,000)
$67,000AGI (after)
(3,000)
STCL Carryover = $1,000
Indefinitely
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 83
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(4,000)
(9,000)
5,000
$70,000
(4,000)
$67,000AGI (after)
(3,000)
What if LTL were $16,000?
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 84
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(16,000)
(9,000)
5,000
$70,000
(4,000)
$67,000AGI (after)
(3,000)
What if LTL were $16,000?
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 85
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(16,000)
(9,000)
(7,000)
$70,000
(4,000)
$67,000AGI (after)
(3,000)
What if LTL were $16,000?
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 86
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(16,000)
(9,000)
(7,000)
$70,000
$67,000AGI (after)
What if LTL were $16,000?
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 87
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(16,000)
(9,000)
(7,000)
$70,000
$67,000AGI (after)
What if LTL were $16,000?
(3,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 88
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(16,000)
(9,000)
(7,000)
$70,000
$67,000AGI (after)
Carryover(s)?
(3,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 89
Problem 5-48, Situation 4
AGI
ST
<ST>
LT
<LT>
$70,000
6,000
(15,000)
9,000
(16,000)
(9,000)
(7,000)
$70,000
$67,000AGI (after)
Carryover(s)?
$6,000 ST
$7,000 LT
(3,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 90
Problem 5-61
Painting $2,000 - $50 = $1,950Ordinary Income
Stock $28,500 - $30,000 = ($1,500) LT
Land $25,000 - $30,000 = ($5,000) ST
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 91
Problem 5-61
Painting $2,000 - $50 = $1,950Ordinary Income
Stock $28,500 - $30,000 = ($1,500) LT
Land $25,000 - $30,000 = ($5,000) ST
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 92
Capital AssetsSection 2619
Capital assets include all assets held by the taxpayer except:
1. Stock in trade of the taxpayer or other property of a kind that would properly be included in the inventory of the taxpayer if on hand at the close of the tax year.
2. Property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business.
3. Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of any properties described in 1. and 2. above.
4. Depreciable property used in the taxpayer's trade or business.
5. Real property used in the taxpayer's trade or business.
6. Certain copyrights, and literary, musical or artistic compositions
7. Letters, memoranda or similar property in the hands of the writer, donees of the writer and persons to whom they were sent or for whom they were produced.
8. U.S. government publications (Congressional Record) received from the government without charge or below the price sold to the public, in the hands of the recipient and carryover_basis transferees (Code Sec. 1221)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 93
Problem 5-61
Painting $2,000 - $50 = $1,950Ordinary Income
Stock $28,500 - $30,000 = ($1,500) LT
Land $25,000 - $30,000 = ($5,000) ST
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 94
Problem 5-61
Painting $2,000 - $50 = $1,950Ordinary Income
Stock $28,500 - $30,000 = ($1,500) LT
Land $25,000 - $30,000 = ($5,000) ST
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 95
Problem 5-61
Painting $2,000 - $50 = $1,950Ordinary Income
Stock $28,500 - $30,000 = ($1,500) ??
Land $25,000 - $30,000 = ($5,000) ST
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 96
Determining the Basis of Assets
Asset acquiredby purchase?
cost + capital improvements - accumulated depreciation = adjusted basis
Federal gift tax paid(basis limited to FMV on date of gift)
Fed. Gift tax x“net appreciation”1
total value of prop.2
donor’s adjusted basis(“date” basis = donor’s date)
FMV on date of gift
(“date” basis = date of gift)
basis for
donor’s adj.basis plus
FMV > donor’s
adjusted basis?
All dispositions yield
LONG TERM results
FMV 6 months
after date of death
FMV on date of death
alt. valuation
date elected?
Acquired
by gift?
Yes(a
fter 3
/1/1
3)
Yes(a
fter 1
920)
Yes
befo
re
1/1/
77
gain
Yes
No
No
(inheritance)
NoNo
lossafter
12/31/76
1 “net appreciation” = (FMV - donor’s adjusted basis)2 FMV - annual exclusion
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 97
Determining the Basis of Assets
Asset acquiredby purchase?
cost + capital improvements - accumulated depreciation = adjusted basis
Federal gift tax paid(basis limited to FMV on date of gift)
Fed. Gift tax x“net appreciation”1
total value of prop.2
donor’s adjusted basis(“date” basis = donor’s date)
FMV on date of gift
(“date” basis = date of gift)
basis for
donor’s adj.basis plus
FMV > donor’s
adjusted basis?
All dispositions yield
LONG TERM results
FMV 6 months
after date of death
FMV on date of death
alt. valuation
date elected?
Acquired
by gift?
Yes(a
fter 3
/1/1
3)
Yes(a
fter 1
920)
Yes
befo
re
1/1/
77
gain
Yes
No
No
(inheritance)
NoNo
lossafter
12/31/76
1 “net appreciation” = (FMV - donor’s adjusted basis)2 FMV - annual exclusion
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 99
Problem 5-61
Painting $2,000 - $50 = $1,950Ordinary Income
Stock $28,500 - $30,000 = ($1,500) LT
Land $25,000 - $30,000 = ($5,000) ST
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 100
Problem 5-61
Painting $2,000 - $50 = $1,950Ordinary Income
Stock $28,500 - $30,000 = ($1,500) LT
Land $25,000 - $30,000 = ($5,000) ST
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 101
1999 4/8 6/30
A B C
$43,000 $30,000 $25,000
Problem 5-61
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 102
Problem 5-61
Painting $2,000 - $50 = $1,950Ordinary Income
Stock $28,500 - $30,000 = ($1,500) LT
Land $25,000 - $30,000 = ($5,000) ST
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 103
Problem 5-61
Painting $2,000 - $50 = $1,950Ordinary Income
Stock $28,500 - $30,000 = ($1,500) LT
Land $25,000 - $30,000 = ($5,000) STa. NSTCL
a.
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 104
Problem 5-61
Painting $2,000 - $50 = $1,950Ordinary Income
Stock $28,500 - $30,000 = ($1,500) LT
Land $25,000 - $30,000 = ($5,000) ST
b. NLTCL
b.
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 105
Problem 5-61
c. effect on AGI?
AGI $40,000
- NSTCL 5,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 106
Problem 5-61
c. effect on AGI?
AGI $40,000
- NSTCL (limit) 3,000
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 107
Problem 5-61
d. carryforward?NSTCL $5,000
Allowed 3,000
Carryforward $2,000
NLTCL $1,500
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 108
Special Treatmentof Long-Term Gains
1954 1986 1997
LTCGD alternate tax rate
reduced rates**
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 109
Rates of Tax“simplified” version
28% collectibles
25% unrecaptured Sec. 1250 gain
20% max for ANCG after 5/6/97
18% after 12/31/00 if held > 5 years
10% if regular rate is 15%
8% after 12/31/00 if held > 5 years
*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 110
Rates of Tax“simplified” version
28% collectibles
25% unrecaptured Sec. 1250 gain
20% max for ANCG after 5/6/97
18% after 12/31/00 if held > 5 years
10% if regular rate is 15%
8% after 12/31/00 if held > 5 years
*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 111
Rates of Tax“simplified” version
28% collectibles
25% unrecaptured Sec. 1250 gain
20% max for ANCG after 5/6/97
18% after 12/31/00 if held > 5 years
10% if regular rate is 15%
8% after 12/31/00 if held > 5 years
*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 112
Rates of Tax“simplified” version
28% collectibles
25% unrecaptured Sec. 1250 gain
20% max for ANCG after 5/6/97
18% after 12/31/00 if held > 5 years
10% if regular rate is 15%
8% after 12/31/00 if held > 5 years
*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 113
Rates of Tax“simplified” version
28% collectibles
25% unrecaptured Sec. 1250 gain
20% max for ANCG after 5/6/97
18% after 12/31/00 if held > 5 years
10% if regular rate is 15%
8% after 12/31/00 if held > 5 years
*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 114
Rates of Tax“simplified” version
28% collectibles
25% unrecaptured Sec. 1250 gain
20% max for ANCG after 5/6/97
18% after 12/31/00 if held > 5 years
10% if regular rate is 15%
8% after 12/31/00 if held > 5 years
*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 115
Rates of Tax“simplified” version
28% collectibles
25% unrecaptured Sec. 1250 gain
15% max for ANCG after 5/2003
18% after 12/31/00 if held > 5 years
10% if regular rate is 15%
8% after 12/31/00 if held > 5 years
*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 116
Rates of Tax“simplified” version
28% collectibles
25% unrecaptured Sec. 1250 gain
15% max for ANCG after 5/2003
18% after 12/31/00 if held > 5 years
5% if regular rate is 10% or 15%
8% after 12/31/00 if held > 5 years
*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 117
Rates of Tax“simplified” version
28% collectibles
25% unrecaptured Sec. 1250 gain
15% max for ANCG after 5/2003
18% after 12/31/00 if held > 5 years
5% if regular rate is 10% or 15%
8% after 12/31/00 if held > 5 years
*
repealed
repealed
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 118
Rates of Tax“simplified” version
28% collectibles, and Sec. 1202 stock
25% unrecaptured Sec. 1250 gain
15% max for ANCG after 5/2003
18% after 12/31/00 if held > 5 years
5% if regular rate is 10% or 15%
8% after 12/31/00 if held > 5 years
*
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 119
Rates of TaxProblem 5-43
A gain from stock held 7 months 28%
B gain from antique clock held 6 yrs 28%
C gain from stock held 3 years 20%
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 120
Rates of TaxProblem 5-43
A gain from stock held 7 months 33%1
B gain from antique clock held 6 yrs 28%
C gain from stock held 3 years 20%
1 TP’s regular marginal rate
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 121
Rates of TaxProblem 5-43
A gain from stock held 7 months 33%
B gain from antique clock held 6 yrs 28%
C gain from stock held 3 years 20%
“Collectibles”
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 122
Rates of TaxProblem 5-43
A gain from stock held 7 months 33%
B gain from antique clock held 6 yrs 28%
C gain from stock held 3 years 15%
* LT capital gain rate
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 123
Rates of TaxProblem 5-43
A gain from stock held 7 months 33%
B gain from antique clock held 6 yrs 28%
C gain from stock held 3 years 15%*
* FYI was 20% before ’03
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 124
Problem 5-49
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 125
Problem 5-49 -- 2010
AGI
ST
<ST>
$40,000
4,000
(9,000)
(5,000)
1,000
$40,000
(4,000)
$37,000AGI (after)
(3,000)LT
<LT>6,000
(5,000)
ST (1,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 126
Problem 5-49 -- 2011
AGI
ST
<ST>
$50,000
5,000
(3,000)
1,000
(11,000)
$50,000
(10,000)
$47,000AGI (after)
(3,000)LT
<LT>10,000
(21,000)
ST (1,000)
LT (7,000)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 127
Problem 5-49 -- 2012
AGI
ST
<ST>
$60,000
7,000
(5,000)
2,000
(5,800)
$60,000
$57,000AGI (after)
(3,000)LT
<LT>2,200
(1,000)LT (7,000) LT (800)
(3,800)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 128
Problem 5-49 -- 2013
AGI
ST
<ST>
$70,000
10,000
(12,000)
(2,000)
(4,300)
$70,000
$67,000AGI (after)
(2,000)
LT
<LT>6,000
(9,500)LT (800)
(1,000)
LT (3,300)
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 129
Problem 5-49 -- 2014
AGI
ST
<ST>
$???
???
???LT
<LT>???
???LT (3,300)
8Finally, brothers [and sisters], whatever is true, whatever is noble, whatever is right, whatever is pure, whatever is lovely, whatever is admirable – if anything is excellent or praise-worthy – think about such things 9Whatever you have learned or received or heard from me, or seen in me – put it into practice. And the God of peace will be with you.
Philippians 4:8-9
8Finally, brothers [and sisters], whatever is true, whatever is noble, whatever is right, whatever is pure, whatever is lovely, whatever is admirable – if anything is excellent or praise-worthy – think about such things 9Whatever you have learned or received or heard from me, or seen in me – put it into practice. And the God of peace will be with you.
Philippians 4:8-9
© Copyright 2002-2013 by M. Ray Gregg. All rights reserved. 131
Have a great life!