business of tion Fand held for more t h0. aThere are lower (60 and 76 stock" sequired after Sept years.42 That is right, there in uired in prior yearsi3 and, to the extent that Seetion he os stocd i gross income, such gain is taxed at a 28 percent uld the gain. aions 1202 gain is in rate etf taxing such gain at a zero, 7 (75 percent exclusion), or 14 tive) percent rate. " However, there are ceiling percent ations on the amount of a shareholder's Section 1202 gain.45 In ition of qualified small business stock is technical of PROBLEMS le taxpayer, has a salary of $200,000 in the current year. T also llowing transactions all involving the sale of capital assets: (1) a 0 on a "collectible" held for 2 years; and (2) a gain of $20,000 T, a single 1. a gain of $15,000 an stock held for 15 months. Determine the amount of T's net capital gain. t what rate will the components of T's net capital gain be taxed? (a) 39 I.R.C. S 1(h)(1). Statutorily if Single had ordinary income taxed at a flat 30% rate and a $10,000 LTCL $7,500 of 28% gain and $7,500 of 25% gain, Single would have $5,000 of net from stock and talgain which would be taxed at the 25% rate under l RC. 1(h)(1)(E) leaving no gain to betaxed at 28% under 1 (h)(1)(F). 41 Thus, if Single had ordinary income taxed at a flat 30% rate, a $15,000 NSTCL and 5,000 of 28% gain, $5,000 of 25% gain and $10,000 of 15% or 20 gain, Single wouldhave a $5,000 NCG. I. R. C. 1 (h)(1)(C) or (D) would apply to tax the $5,000 net capital gain at a 15% or 20% rate. $ 1212(b)O)(B) LTCL carryover which is all treated as a loss capital asset whose gain would be taxed at 28% rate. See I.RC. 1(h)(4)(B)() and the Similar principles apply to a NS THE CHARACTERIZATION OF INCOME AND DEDUCTIO a flat 30% tax on ordinary income and % tax (e) Assuming there is disregarding any deductions (including the deduction and personal exemption), what is T's tax liabli the current year? standard hat is T's tax liability in with a salary of $50 2. S, a single taxpayer, is a high-income taxpayer in the current year. S also has the following transactions involving nntalets ( a gain of $120,000 on stock held for 15 months and THE CHARACTERIZATION OF INCOME AND DEDUCTIONS PART & (c) Assuming there is a flat 30% tax on ordinary income and disregarding any deductions (including the standd euction and personal exemption), what is T's tax liability in the current year? 2. S, a single taxpayer, is a high-income taxpayer with a salary of in the current year. S also has the following transac tions involving the sale of capital assets: (1) a gain of $120,000 on stock held for 15 months and (2 loss of $20,000 on stock held for 3 years. Assume there is a flat 30% taxon ordinary income and disregarding any deductions (including the standard deduction), what is S's tax liability under 1 in the current year? 3. Taxpayer, who is in the highest federal tax bracket in the current year, has a $5,000 gain from a collectible and a $5,000 gain from stock, both held ong-term. (a) What is Taxpayer's net capital gain and how is it taxed if Taxpayer also has a $5,000 loss from a collectible held long 02 deduction and personal esemp the current year? 2. S. a single taxpayer, is a high-income taxpayer with sair in the current year. S also has the following transactions involvin of capital assets: (1) a gain of $120,000 on stock held for 15 monthe loss of $20,000 on stock held for 3 years.. Assume there is a flat 30% ordinary income and disregarding any deductions (including on deduction). what is S's tax liability under $ 1 in the current year? 3. Taxpayer, who is in the highest federal tax bracket in the cu 8500 against cap ch succeeding yea The statutory Part B of this Cha transactions and s against net shorts. reviously discus has a $5,000 gain from a collectible and a $5,000 gain from stock, both he long-term. rrent First, eliminates, dollar there may be a ne dollar, any net sh short-term and familiar, present utilized in any y situations. Fi (a) What is Taxpayer's net capital gain and how is it taxed Taxpayer also has a $5,000 loss from a collectible held I term? ong- (b) What results in (a), above, if instead Taxpayer's $5,000 loss is from stock held long-term? (c) What results in (a), above, if instead Taxpayer's $5,000 loss is from stock held for 9 months rather than from the collectible? (d) What is Taxpayer's net capital gain and how is it taxed if Taxpayer has a $5,000 gain from a collectible, a $5,000 unrecaptured S 1250 gain, a $5,000 gain from stock, and a all tl Implicit in dichotomy betw limitless capac of ordinary in reason for th against ordin utilization of $10,000 loss from stock, all held long-term? C. THE MECHANICS OF CAPITAL LOSSES Internal Revenue Code: Sections 1211 (b); 1212(b)(1), (2)(A)(); 1222(10) See Sections 165(c) and (); 1211(a); 1212(a); 1221(a)(1)-(4); 1222 discussion The Sect of capital los losses are de exceed such of $3,000 (S return) or t The losses discussed here are only deductible losses. Under Section 1222(2) and (4), the terms short-term capital loss and long-term capital loss are defined to include only such losses as are "taken into account in computing taxable income." Before we can discuss the mechanics o canital losses we must therefore determine nhether a loss is taken into An illu this exam disregarde business of tion Fand held for more t h0. aThere are lower (60 and 76 stock" sequired after Sept years.42 That is right, there in uired in prior yearsi3 and, to the extent that Seetion he os stocd i gross income, such gain is taxed at a 28 percent uld the gain. aions 1202 gain is in rate etf taxing such gain at a zero, 7 (75 percent exclusion), or 14 tive) percent rate. " However, there are ceiling percent ations on the amount of a shareholder's Section 1202 gain.45 In ition of qualified small business stock is technical of PROBLEMS le taxpayer, has a salary of $200,000 in the current year. T also llowing transactions all involving the sale of capital assets: (1) a 0 on a "collectible" held for 2 years; and (2) a gain of $20,000 T, a single 1. a gain of $15,000 an stock held for 15 months. Determine the amount of T's net capital gain. t what rate will the components of T's net capital gain be taxed? (a) 39 I.R.C. S 1(h)(1). Statutorily if Single had ordinary income taxed at a flat 30% rate and a $10,000 LTCL $7,500 of 28% gain and $7,500 of 25% gain, Single would have $5,000 of net from stock and talgain which would be taxed at the 25% rate under l RC. 1(h)(1)(E) leaving no gain to betaxed at 28% under 1 (h)(1)(F). 41 Thus, if Single had ordinary income taxed at a flat 30% rate, a $15,000 NSTCL and 5,000 of 28% gain, $5,000 of 25% gain and $10,000 of 15% or 20 gain, Single wouldhave a $5,000 NCG. I. R. C. 1 (h)(1)(C) or (D) would apply to tax the $5,000 net capital gain at a 15% or 20% rate. $ 1212(b)O)(B) LTCL carryover which is all treated as a loss capital asset whose gain would be taxed at 28% rate. See I.RC. 1(h)(4)(B)() and the Similar principles apply to a NS THE CHARACTERIZATION OF INCOME AND DEDUCTIO a flat 30% tax on ordinary income and % tax (e) Assuming there is disregarding any deductions (including the deduction and personal exemption), what is T's tax liabli the current year? standard hat is T's tax liability in with a salary of $50 2. S, a single taxpayer, is a high-income taxpayer in the current year. S also has the following transactions involving nntalets ( a gain of $120,000 on stock held for 15 months and THE CHARACTERIZATION OF INCOME AND DEDUCTIONS PART & (c) Assuming there is a flat 30% tax on ordinary income and disregarding any deductions (including the standd euction and personal exemption), what is T's tax liability in the current year? 2. S, a single taxpayer, is a high-income taxpayer with a salary of in the current year. S also has the following transac tions involving the sale of capital assets: (1) a gain of $120,000 on stock held for 15 months and (2 loss of $20,000 on stock held for 3 years. Assume there is a flat 30% taxon ordinary income and disregarding any deductions (including the standard deduction), what is S's tax liability under 1 in the current year? 3. Taxpayer, who is in the highest federal tax bracket in the current year, has a $5,000 gain from a collectible and a $5,000 gain from stock, both held ong-term. (a) What is Taxpayer's net capital gain and how is it taxed if Taxpayer also has a $5,000 loss from a collectible held long 02 deduction and personal esemp the current year? 2. S. a single taxpayer, is a high-income taxpayer with sair in the current year. S also has the following transactions involvin of capital assets: (1) a gain of $120,000 on stock held for 15 monthe loss of $20,000 on stock held for 3 years.. Assume there is a flat 30% ordinary income and disregarding any deductions (including on deduction). what is S's tax liability under $ 1 in the current year? 3. Taxpayer, who is in the highest federal tax bracket in the cu 8500 against cap ch succeeding yea The statutory Part B of this Cha transactions and s against net shorts. reviously discus has a $5,000 gain from a collectible and a $5,000 gain from stock, both he long-term. rrent First, eliminates, dollar there may be a ne dollar, any net sh short-term and familiar, present utilized in any y situations. Fi (a) What is Taxpayer's net capital gain and how is it taxed Taxpayer also has a $5,000 loss from a collectible held I term? ong- (b) What results in (a), above, if instead Taxpayer's $5,000 loss is from stock held long-term? (c) What results in (a), above, if instead Taxpayer's $5,000 loss is from stock held for 9 months rather than from the collectible? (d) What is Taxpayer's net capital gain and how is it taxed if Taxpayer has a $5,000 gain from a collectible, a $5,000 unrecaptured S 1250 gain, a $5,000 gain from stock, and a all tl Implicit in dichotomy betw limitless capac of ordinary in reason for th against ordin utilization of $10,000 loss from stock, all held long-term? C. THE MECHANICS OF CAPITAL LOSSES Internal Revenue Code: Sections 1211 (b); 1212(b)(1), (2)(A)(); 1222(10) See Sections 165(c) and (); 1211(a); 1212(a); 1221(a)(1)-(4); 1222 discussion The Sect of capital los losses are de exceed such of $3,000 (S return) or t The losses discussed here are only deductible losses. Under Section 1222(2) and (4), the terms short-term capital loss and long-term capital loss are defined to include only such losses as are "taken into account in computing taxable income." Before we can discuss the mechanics o canital losses we must therefore determine nhether a loss is taken into An illu this exam disregarde