Capital Assets

Ordinary Income rate

Net gain taxed at income tax rate and 21% for corporate taxpayers

Taxed as capital transactions-Noncorporate TP

Net gain taxed at either ordinary rate or prefer. Capital rate. Net loss upto $3K offset other income. Unused capital loss carry forward

Taxed as capital transactions-corporate TP

Net gains taxed at corporate rate (no preferential rate) without $3K loss offsets. Net losses carried back 3yrs and carry forward 5 yrs.

Basis of gifted BIG property

Donor's basis= Donee's basis

Basis of inherited property

FMV of the property as of date of death

Reporting gain/loss from installment sale

Use to report gain only and not loss

Sec 1202 Stock QSBS (Qualified Small Business Stock)

Noncorporate shareholders can exclude significant gain from selling share of domestic C-corporation.

Taxation of QSBS

Gain excluded from gross income is also excluded from net investment tax

Gain not excluded taxed at max capital tax rate.

Wash Sale

Selling a security at a loss for tax and, within 30 days of before or after, purchasing the same or a substantially identical security. The IRS disallows the claimed loss.

Tax on wash sale loss

Disallowed. Amount added to the cost basis of the replacement shares

Related Party Transactions Sec. 267

Loss not recognized on sale but gains are taxable. Disallowed loss adjust basis when sold to unrelated party.

Treatment of "total capital gain dist" on 1099-DIV

Taxed at LTCG rate

Net Investment Tax

Additional tax on capital gain at 3.8% to TP with AGI > $250K MFJ, $125K MFS and Single, $200K HOH.

3 CONDITIONS TO RECOGNIZE ALL PASSIVE LOSS CARRYFORWARD UNDER SEC. 469(g)

1) Full disposition of the entire activity 2) In a fully taxable transaction 3) To an unrelated party