|
New Capital Gains Breaks
The Taxpayer
Relief Act of 1997 provides several tax breaks for individuals who
sell property at a gain. After May 6, 1997, The new law cuts the
top tax rate on long-term capital gains of individuals, estates
and trust to 20% (down from 28%). To the extent that the gains do
not put you into a bracket over 15%, your gains will be taxed at
a rate of only 10%. The tax rate cut to 20% (or 10%), however, does
not apply to capital gains on the sale of real property (to the
extent the gain is due to depreciation deductions taken on the property),
collectibles, or to include gain on the sale of qualified small
business stock.
The holding
period for long-term capital gain treatment increased during 1997.
To be eligible for the new tax rate, you must own the eligible
property for more than 18 months before selling it. However, for
sales after May 6, 1997 and before July 29, 1997, the new rate
also applies to sales of property you owned more than one year
even though not owned for more than 18 months. Beginning January
1, 1998, the holding period for long term capital gains was reduced
from 18 months back to one year (12 months).
The new law
does not change the following rules: short -term capital gains
loss excess will be used to reduce your long-term capital gains;
long-term capital loss excess will be used to reduce your short-term
capital gains; and you can still use up to $3,000.00 of your capital
losses to reduce your ordinary income, and any excess can be carried
over to your next tax year.
If you owned
mutual funds, a partnership interest, an S corporation, or an
estate or trust, these entities were required to inform you of
the type of capital gains taxable during the three different periods
for 1997 by the key dates.
If you have
considerable gains in a year and have some investment stock that
you are holding in a loss position, you might want to consider
selling the stock to get the capital loss deduction during this
tax year to off set your gain. If you wish to continue holding
the loss stock, wait 30 days and buy it back. You now will have
a lower cost basis in this stock when you get ready to sale it
later.
Be sure to
consult with a tax advisor for proper planning and implementation
of tax savings ideas to be sure they are right for you.
C.
David Pitzer, CPA, PC
118
Two Mile Pike
Goodlettsville, TN 37072
(615) 851-2727
Fax: (615) 851-8711
Site
Design Provided By:
|
