Investor Gains & Losses
Book: 201
Table of Content
1. NEW CAPITAL GAINS RATES 1-1
The “Old Law” Deduction 1-2
Reasons for New Rate Changes 1-3
Overview of New Law 1-4
Key Definitional Terms 1-6
When the 10% Rate 1-8
When the 20% Rate 1-10
When the 25% Rate 1-10
When the 28% Rate 1-13
Qualified 5-Year Gain 1-14
Where Gain Reduction Required 1-15
Treatment of Installment Sales 1-16
2. HOW “INVESTOR” TAX DEFINED 2-1
Capital Asset Defined 2-2
Passivity: The Main Key 2-4
No Social Security Tax 2-6
“Trade or Business” Explained 2-7
Borderline Examples 2-8
Managing Own Investments? 2-11
Treatment of Investment Expenses 2-13
3. MATCHING BROKER RETURNS 3-1
Birth of TEFRA Concept 3-2
Code Section 6045 3-4
Backup Withholding: 31% 3-5
Taxing Gross Proceeds 3-6
Broker Form 1099-B 3-7
Search for “Substitute Statements” 3-10
How “Computer Matching” Works 3-11
Misperception by the IRS 3-13
Role of “Straw Sales” 3-15
Nominee Reportings 3-17
4. SCHEDULE D (1040) OVERVIEW 4-1
How Formatted & Why 4-2
Five Parts, Actually 4-4
Other Differences: I & II 4-5
The Columnar Headings 4-6
Use of Continuation Sheets 4-9
Eyeing the Bull’s Eyes 4-11
Line Numberings Continued 4-12
Part II: Not “Self-Netting” 4-13
Part III: If a Gain 4-16
5. COST OR OTHER BASIS 5-1
Column (e): The Focus 5-2
Must “Capitalize” Costs, Etc. 5-4
Cost Basis in Stock Shares 5-7
The “Specific Identification” Method 5-8
The “First-In, First-Out” Method 5-10
The “Average Cost” Method 5-12
The “Cumulative Cost” Method 5-13
The Confusion Caldron: Dividends, Etc. 5-16
Employee Stock Options 5-18
Basis Upon Exchange 5-19
Basis Upon Gift 5-20
Basis Upon Inheritance 5-22
Substituted Basis Rules 5-23
6. DIRECT ENTRY TRANSACTIONS 6-1
Corral Your 1099-Bs 6-2
Count Sales & Tally Proceeds 6-3
Identify by Holding Periods 6-5
Short-Term & “Extraneous” Sales 6-7
Example Part I Entries 6-8
Where the Action Lies 6-10
Role of “Creativity” in Part II 6-12
Real Life Creative Examples 6-13
Summarizing the Parts 6-15
7. SPECIAL TREATMENT SALES 7-1
The Wash Sale Rule 7-2
Stock for Stock Exchange 7-3
50% Exclusion of Gain: QSBS 7-5
Rollover of QSBS Gain 7-6
Worthless Securities; Treatment of 7-8
Related Persons Transactions 7-10
Certain Foreign Corporations 7-13
Short Sales: Borrowed Stock 7-15
Options to Buy or Sell 7-18
8. INDIRECT GAIN/LOSS ENTRIES 8-1
Mark-to-Market Contracts 8-2
Transfer Collection Lines 8-4
Form 2119: Sale of Residence 8-5
Form 2439: Undistributed Capital Gains 8-7
Form 4684: Casualty Gain or Loss 8-9
Form 4797: Business Property Sales 8-11
Form 6252: Installment Sales 8-13
Form 8824: Like-Kind Exchanges 8-15
Hand Notations & Worksheets 8-17
9. GAIN/LOSS FROM PASS-THRUS 9-1
What Section 1(h) Says 9-2
What Schedule D Says 9-4
Role of Schedules K-1 9-5
Partnership Schedule K-1 9-8
Section 1231 Gain/Loss 9-9
S Corporation K-1 9-10
Differences in Schedule Ds 9-12
Estates and Trusts 9-13
Capital Gain Distributions 9-15
Transfers to Foreign Entities 9-17
10. CAPITAL LOSS TREATMENT 10-1
“The Law” on Point 10-2
If More Than $3,000 Loss 10-4
If “Negative” Taxable Income 10-5
Capital Loss Carryovers 10-6
Worksheet Rule of Thumb 10-7
Carryback of Certain Losses 10-9
Section 1231 Loss Conversion 10-11
Section 1244 Stock Losses 10-13
Bad Debt: Business v. Nonbusiness 10-15
Undercapitalization Losses 10-17
11. MAXIMUM RATE COMPUTATIONS 11-1
Estimating Potential Savings 11-2
A Schematic Overview 11-3
Initial Stripping Process 11-6
Modified Taxable Income 11-8
Reference Base Tax 11-9
Basketing Made Easy 11-11
Adding and Comparing 11-12
Playing a Little Trick 11-15
12. ALTERNATIVE MINIMUM TAX 12-1
Two Flat-Tax Rates 12-2
Components of AMTI 12-4
Conflict With Capital Gain Rates 12-5
Form 6251: Old vs. New 12-6
Using Part IV, Form 6251 12-8
Your Base ATI Tax 12-9
Verifying Necessity of Part IV 12-12
Applying Capital Gain Rates 12-14
Adding and Comparing 12-15 |
