Page 74 - LIN.JANWEB

FINANCE
CAPITAL

GAINS & LOSSES

by Michael Wiener, E.A. Capital
W hen you sell a "capital asset", the sale usually percent to certain net investment assets would

results in a capital gain or loss. So, what is income of individuals, estates and
a capital asset? Typically, a capital asset is any trust above statutory threshold include your
property held by a taxpayer except for inventory, accounts amounts. As a side note, I have home, your
or notes receivable from a trade or seen where large capital gains car and your
business, depreciable property used have also subjected the taxpayer
in a trade or business, real estate to the alternative Minimum Tax. investments
used in a trade or business (including Capital losses are netted, short such as stocks
rental property, certain commodity term losses against short term
and bonds.
financial instruments and hedging gains and long term losses against
transactions), supplies used in a trade long term gains. If your capital
or business, certain future payments losses exceed your capital gains,
rights, and self-centered copyrights you can deduct the difference as a loss on your tax return.
including literacy and musical This loss is limited to $3,000 per year, or $1,500 if you are
compositions. Capital assets would include your home, married and file a separate return. If your total net capital
your car and your investments such as stocks and bonds. A loss is more than the limit, you can carry over the losses to
capital gain or loss is the difference between your basis and next year's tax return and start the process all over again.
the amount received when you sell an asset. The basis of Finally, when reporting your capital gains and losses on
an asset is usually your purchase price, although sometimes your tax return you must file Form 8949, Sales and Other
there may be other ways to determine the basis. Examples Dispositions of Capital Assets, you also need to file Schedule
include inheritances, trades or exchanges. D, Capital Gains and Losses. Because of the complexity of
Capital gains and losses are either long or short term, the tax law, I always advise seeing a tax specialist to help you
depending on how long you held the property. If you held file your tax return correctly.
the property for more than one year, your gain or loss is long
term. If you held it for one year or less, then the property is
short term.
If you should have a topic that you would like me
Again on the sale of personal property, such as your
to discuss or if you should have a question, please
personal home is taxed as a capital gain. A loss on the
feel free to call 239.403.4410 or e-mail me at
sale of personal property used for personal purposes is not
michael@mwtaxandaccounting.com.
deductible. Deductible losses are allowed only for a business
investment, casualty or theft losses.
An enrolled agent, licensed by the US Department
The tax rate you will pay for a capital gain depends on
of the Treasury to represent taxpayers before
the holding period, type of capital asset and the taxpayer's
the IRS for audits, collections and appeals. To
ordinary income tax bracket. Short term capital gains are
attain the enrolled agent designation, candidates
usually taxed at ordinary income tax rates. You will pay
must demonstrate expertise in taxation, fulfill
from 0 percent, 15 percent, 20 percent, 25 percent and in
continuing education credits and adhere to a
some instances, 28 percent on long term capital gains. In
stringent code of ethics.
addition, to capital gains tax you may be subject to Net
Investment Income Tax. The NIIT applies at a rate of 3.8

74 Life in Naples | January 2017