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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 will look at capital gains and capital losses and how they are taxed. It is important to review the relevant tax talk, regardless of whether you are using the 38th or 39th edition of "Southwest and Federal Taxation 2015 or 2016." The topic of capital gains and losses is covered in Chapter 14 of the book. Before we begin, it is essential to clarify the definition of a capital asset. However, my lecture does not replace the need to read the book. Now, let's discuss the taxation of capital gains and losses and why they are treated differently from other types of gains. There are two main reasons for this differentiation. Firstly, long-term capital gains may be taxed at a lower rate compared to ordinary gains. To benefit from this tax advantage, it is important to understand what constitutes a long-term capital gain. A long-term capital gain occurs when an asset is held for more than one year. We will explore this concept in more detail. Secondly, if an individual has a net capital loss, they can deduct up to $3,000 from their taxable income. This deduction can be used to offset ordinary income. In the case of losses, they can be used to offset any gains. The proper classification of gains and losses depends on three characteristics. First, we need to determine if the property is considered a capital asset. This can be understood by referring to section 1231 of the tax code. The second characteristic to consider is the manner in which the property was disposed of, such as through sale, exchange, casualty, theft, or condemnation. Lastly, we need to assess the holding period of the property. Was it held for a short term or a long term? Based on these three factors,...