Video instructions and help with filling out and completing How Form 4797 Transaction

Instructions and Help about How Form 4797 Transaction

Asahara in this session we would look at capital gains and capital losses and how do we tax capital gains and capital losses now bear in mind you will need to review tax talk even if you are using the capital at the 38th edition or the 39th edition if you're using the southwest and federal taxation 2015 or 2016 regardless you need to read the book so the capital and capital gains and losses are covered in chapter 14 so here's the book in front of you now so you know definition of capital asset and this is what gonna be covering but my lecture does not substitute breathing the water so the first thing I want we want to discuss is taxation of capital gain and capital assets so that why do we drink capital gains and capital losses different from other types of games okay they must be septic they must be separated from other types of games and losses for two reasons what are those two reasons for one thing long-term capital gains may be taxed at a lower rate than ordinary games so we have ordinary venue's the tax rate might be higher than long-term capital gains because with we can save on our taxes on capital gains long-term capital gains versus ordinary games we need to know what constitutes long-term capital things how do we define that something is long-term capital gain well long term capital gain if we hold the asset greater than one year and we'll look at it to do that more in details how to how did they find out to eventually also this is for the long term for the net capital loss if it's a net capital loss and if we are an individual so we are an individual and we have a net capital loss and even if you don't know what capital gains and capital losses are well then I look at them in detail shortly but just know that for a quarter for a capital loss if it's what individual we can deduct up to three thousand thirty years we can reduce our taxable income we can use it against ordinary income we could reduce we can reduce taxable income by three thousand so if we have only losses that's assume we have losses and we don't have any kings so we can use the losses to offset actually ordinary gain we can offset ordinary earnings or ordinary gain okay ordinary income so capital losses for individual we can deduct up to three thousand only if we have lots of let's assume we have gains and we have losses the losses to offset the Kings and if you have any losses left for individual we can do that after three thousand we're going look and these rules will do that more in detail shortly but this is why we have to keep the capital gains and losses separate from other type of gains and losses and we'll see the rules later on so this is basically an introduction okay so the proper classification of gains and losses how do we know this is a capital gain or a capital loss for some other game okay it depends on three characteristics one the first characteristic is the fact status of the property is the property consider the capital asset so what is capital asset we talk about capital asset surely is the answer to consider section 1231 asset and what is section 1231 asset we're gonna find out what is it then order the Navy answer this is one thing we have to look at the other one is the manner of the property disposition by sale exchange casual theater or condemnation and basically you look at the exchanges and apply your chapter so you should have an idea how an exchange will also the whole thing period of the property that we held in short term or did we hold the property long term so three things based on those three things we can determine the proper classification of capital gain and capitalists but the first thing we need to define hopefully you know what is what is capital asset right so the first thing we need to define is what if staff analyzed it so they take good notes because we need to know how to define capital asset knowing how to define capital asset will help you define section 1231 okay so let's see how the code define capital hazard so section 12 21 this is the tax code the fine capital asset so let's see how they define capital asset define capital asset as everything that size except except what so it's everything cap everything is capital assets except inventory stock and 3 and your inventory notes and accounts receivable acquired from the sale of inventory or performance of services basically the receivable that you generate from your services Realty and depreciable property used in trade or businesses so I'm gonna talk a little bit more about here so what are we saying here Machinery machinery and equipment as well as land and building those that are used in a business so notice I'm gonna add this at the important would those are used in business if they are used in a business they are not capital asset so those things Realty is we have real property which is land and building and depreciable property such as machinery and equipment if they are used in business they are not capital and stuff furthermore they are not only not capital asset we call them we call them section 1231 asset they are section 1231 asset so if I ask you what is section 1231 asset could you tell me you would say machinery and equipment land and building and if you stop you are incorrect so it is machinery and equipment blend and bendlin and building in the most important thing they