gains - Linkenheimer LLP CPAs & Advisors

How Section 1231 Gains and Losses Affect Business Asset Sales

When selling business assets, understanding the tax implications is crucial. One area to focus on is Section 1231 of the Internal Revenue Code, which governs the treatment of gains and losses from the sale or exchange of certain business property.

Business gain and loss tax basics

The federal income tax character of gains and losses from selling business assets can fall into three categories:

Capital gains and losses. These result from selling capital assets which are generally defined as property other than 1) inventory and property primarily held for sale to customers, 2) business receivables, 3) real and depreciable business property including rental real estate, and 4) certain intangible assets such as copyrights, musical works and art works created by the taxpayer. Operating businesses typically don’t own capital assets, but they might from time to time.
Sec. 1231 gains and losses. These result from selling Sec. 1231 assets which generally include 1) business real property (including land) that’s held for more than one year, 2) other depreciable business property that’s held for more than one year, 3) intangible assets that are amortizable and held for more than one year, and 4) certain livestock, timber, coal, domestic iron ore and unharvested crops.
Ordinary gains […]

By Linkenheimer LLP|2025-01-15T17:42:03+00:00January 15th, 2025|business, capital gains|0 Comments

Strategies For Investors To Cut Taxes As Year-End Approaches

The overall stock market has been down during 2022 but there have been some bright spots. As year-end approaches, consider making some moves to make the best tax use of paper losses and actual losses from your stock market investments.

Tax rates on sales

Individuals are subject to tax at a rate as high as 37% on short-term capital gains and ordinary income. But long-term capital gains on most investment assets receive favorable treatment. They’re taxed at rates ranging from 0% to 20% depending on your taxable income (inclusive of the gains). High-income taxpayers may pay an additional 3.8% net investment income tax.

Sell at a loss to offset earlier gains

Have you realized gains earlier in the year from sales of stock held for more than one year (long-term capital gains) or from sales of stock held for one year or less (short-term capital gains)? Take a close look at your portfolio and consider selling […]

By Linkenheimer LLP|2022-12-13T16:06:29+00:00December 13th, 2022|capital gains, year-end|0 Comments

Steer Clear Of The Wash Sale Rule If You’re Selling Stock By Year End

Are you thinking about selling stock shares at a loss to offset gains that you’ve realized during 2020? If so, it’s important not to run afoul of the “wash sale” rule.

IRS may disallow the loss

Under this rule, if you sell stock or securities for a loss and buy substantially identical stock or securities back within the 30-day period before or after the sale date, the loss can’t be claimed for tax purposes. The rule is designed to prevent taxpayers from using the tax benefit of a loss without parting with ownership in any significant way. Note that the rule applies to a 30-day period before or after the sale date to prevent “buying the stock back” before it’s even sold. (If you participate in any dividend reinvestment plans, it’s possible the wash sale rule may be inadvertently triggered when dividends are reinvested under the plan, if you’ve separately sold some of the same stock at a loss within the 30-day period.)

By Linkenheimer LLP|2020-12-14T23:11:39+00:00December 14th, 2020|ira, irs, stock|0 Comments

Selling Securities by Year End? Avoid the Wash Sale Rule

If you’re planning to sell assets at a loss to offset gains that have been realized during the year, it’s important to be aware of the “wash sale” rule.

How the rule works

Under this rule, if you sell stock or securities for a loss and buy substantially identical stock or securities back within the 30-day period before or after the sale date, the loss can’t be claimed for tax purposes. The rule is designed to prevent taxpayers from using the tax benefit of a loss without parting with ownership in any significant way. Note that the rule applies to a 30-day period before or after the sale date to prevent “buying the stock back” before it’s even sold. (If you participate in any dividend reinvestment plans, the wash sale rules may be inadvertently triggered when dividends are reinvested under the plan, if you’ve separately sold some of the same stock at a loss within the 30-day period.)

Keep in […]

By Linkenheimer LLP|2020-09-03T20:03:33+00:00October 22nd, 2019|income tax, individuals, investment, retirement, roth ira|0 Comments

Tax Planning for Investments Gets More Complicated

For investors, fall is a good time to review year-to-date gains and losses. Not only can it help you assess your financial health, but it also can help you determine whether to buy or sell investments before year end to save taxes. This year, you also need to keep in mind the impact of the Tax Cuts and Jobs Act (TCJA). While the TCJA didn’t change long-term capital gains rates, it did change the tax brackets for long-term capital gains and qualified dividends.

For 2018 through 2025, these brackets are no longer linked to the ordinary-income tax brackets for individuals. So, for example, you could be subject to the top long-term capital gains rate even if you aren’t subject to the top ordinary-income tax rate.

Old rules

For the last several years, individual taxpayers faced three federal income tax rates on long-term capital gains and qualified dividends: 0%, 15% and 20%. The rate brackets were tied to the ordinary-income rate brackets.

Specifically, if the long-term capital gains and/or dividends fell within the 10% or 15% ordinary-income brackets, no federal income tax was owed. If they fell within the 25%, 28%, 33% or 35% ordinary-income brackets, they were taxed […]

By Linkenheimer LLP|2018-10-03T17:39:36+00:00October 3rd, 2018|investment, New Tax Laws, planning, tax planning|0 Comments