Capital Gain or Ordinary Income?
Author: Jennifer Kowal
| CPE Credit: |
2 hours for CPAs
2 hours Federal Tax Related for EAs and OTRPs
2 hours Federal Tax Law for CTEC |
Recognizing which assets are capital assets can save significant tax amounts, especially with a rate difference of more than 20 percent between long-term capital gain and ordinary income. This course will provide detailed training on the types of assets that produce long-term capital gain and loss upon sale, with case studies involving real estate, intellectual property, internet based sales, and more. Ms. Kowal will also explain the applicability of the five different possible capital gain rates that apply to different types of income, and the applicability of the 3.8% Medicare tax to certain capital gain transactions.
Publication Date: November 2022
Designed For
Tax practitioners at all levels who provide advice and return preparation involving sale transactions.
Topics Covered
- Capital Gain Rules Why Do They Matter?
- Why Give a Preference for Capital Gains?
- Capital Gain Mechanics
- Gain and Loss Netting
- Some Special Rules
- Capital Gain Rates
- The Six Partial Taxes of 1(H)
- Capital Gain Calculation Example
- Six Partial Taxes
- Capital Gain Calculation Mechanics
- 3.8% Medicare Tax on Unearned Income
- "Medicare" Tax?
- Net Investment Income
- 3.8% on Gains
- Ancillary Issues on
3.8% Tax
- What Is a Capital Gain?
- Exceptions to Capital Assets
- Notes on Held for Sale to Customers in Ordinary Course of Business
- Real or Depreciable Property Used in a Trade or Business
- Property Created by Personal Efforts of Taxpayer
- Accounts Receivable
- Hedging Transactions
- Corn Products
- Arkansas Best
- 1221(a)(7) and Hedging Transactions
- Substitute for Ordinary Income
- Selling the Tree Versus Selling the Fruit
- Selling Contract Rights
- Patents
- Sale or Exchange Requirement
- Subsequent Related Transactions
Learning Objectives
- Describe a capital asset, including important exceptions
- List the five different possible rates for taxing long term capital gain
- Recognize how to define the differences in capital gain status depending on key facts, for assets such as contracts, intellectual property and real estate
- Identify when the 3.8% Medicare tax applies to capital gain transactions
- Identify the last step in capital gain mechanics and the second step in the stair-step approach
- Identify the Medicare tax percent on unearned income
- Identify an example of a capital asset in accordance with §1222
Level
Intermediate
Instructional Method
Self-Study
NASBA Field of Study
Taxes (2 hours)
Program Prerequisites
Basic familiarity with sale transactions and how to calculate gain and loss.
Advance Preparation
None
