[REG] Disposes of property ( loss / gain of capital asset)

Disposes of property

Capital asset: assets held or used for 1) investment(stocks, bonds, virtual currency) 2) personal use(personal car, home, furniture) * not capital asset: held for sale to customers in the ordinary course of business(inventory)                                used in a taxpayer's trade or business(real property or personal property)

Ordinary asset: not capital asset

 

Capital Loss deduction and Loss carryover Rules

individuals

- Gain/loss netting rules

  ST ordinary tax rate group / LT 28% tax rate group(collectible and QSBS) / LT 0~20% tax rate group

*corps do not get the benefit of lower capital gain rates

- 3K max deduction against ordinary/passive/portfolio income(per year)

- excess net capital loss carryforward unlimited, no carryback is allowed

	Offset income or gains	Carryback	Carryforward
individual capital losses	$ 3K	No	Indefinitely
corporate capital losses	No	3 yrs	5 yrs

 

Collectibles and Qualified Small Business Stock(QSBS) 28 percent Rate Group

long-term gains on the sale of collectibles(works of art, stamp or coin collections, antiques)

 

Section 1202 QSBS

- original issue C corp stock held for more than 5yrs

- C corps tax basis in its assets no more than 50 million

- the taxpayer is allowed to exclude part of the gain on the sale of QSBS

- the gain excluded is the greater of 10 million or ten times the taxpayer's basis in the stock

- any gain above the excluded amount is taxed at a max rate of 28%

 

Worthless stock and securities

- treated as a capital loss

 

Short Sales

- Sell now and buy later

 

Nondeductible Losses

Wash Sales

Security(stock or bond) sold for a loss + repurchased within 30 days before/after the sale date

- loss on the wash sale is disallowed for tax purposes

- Basis of the repurchased security = purchase price + Disallowed loss

- The oldest share is sold first

 

Related party transactions

 

Personal losses