Taxation of Capital Gains & Losses

* Calculate gain/loss from sale of each capital asset.

* Net gains/losses by holding period – i.e. short-term and long-term * If both “same”, stop do not net again. * If “opposite”, net one final time.

* If results are: * Net Short-Term Capital Gain – Taxed as ordinary income * Net Long-Term Capital Gain – Taxed at preferential rates * 28% Rate Gain = Collectibles Gain
(Collectibles Gain – Net Short-term Capital Loss – Long-term Capital Loss Carryforward) * 25% Rate Gain = Unrecaptured Sec. 1250 Gain * 0%/15%/20% Rate Gain = Net LTCG – Amount taxed at 28% - Amount taxed at 25% * Net Short-Term and Long-Term Capital Loss – Deduct up to $3,000 as ordinary loss

Example:
Tom sold the following during the year: | Date | Date | Original | Accum. | Sales | Asset | Acquired | Sold | Cost | Depr. | Price | ABC Stock | 1/1/2010 | 7/1/2013 | $ 10,000.00 | $ - | $ 15,000.00 | Land (Investment) | 1/1/2008 | 7/1/2013 | $ 100,000.00 | | $ 125,000.00 | XYZ Stock | 2/1/2013 | 10/1/2013 | $ 25,000.00 | | $ 16,000.00 | Rare Coins (Collectible) | 1/1/1998 | 1/1/2013 | $ 10,000.00 | | $ 25,000.00 | Equipment (Business-Use) | 1/1/2011 | 5/1/2013 | $ 100,000.00 | $ 56,270.00 | $ 105,000.00 | Building (Business-Use) | 1/1/2010 | 5/1/2013 | $ 800,000.00 | $ 81,225.00 | $ 850,000.00 | Furniture (Business-Use) | 1/1/2011 | 5/1/2013 | $ 50,000.00 | $ 28,135.00 | $ 40,000.00 |

Please note, Tom recognized a net Sec. 1231 loss of $40,000 on his 2012 tax return and has a long-term capital loss carryforward of $5,000.

Tom’s net income before taking into account the assets sold was $100,000. Calculate Tom’s income tax liability for 2013 assuming he is single.