IRS Tax Tip 2010-35: 10 Facts About Capital Gains and Losses
Hello Everyone,
FYI, here is a very nice, brief overview of Capital Gains and Losses provided by the IRS.
As a member of an investment club, you will be dealing with these in two ways. Each year,
as your club sells stocks, your portion of the (hopefully) gains but sometimes
losses will be reported to you on the K-1 your club will give you. You will transfer this amount
to your personal taxes to combine with any other investment income you have and you will
pay the appropriate taxes on it.
In addition, as you make contributions to your club over the years you are making an investment
in the club. Your basis in the club will be determined by the amount of money you have
contributed and withdrawn combined with the amount of taxable income you have had
reported to you each year. When you ultimately withdraw money from the club, you will have a capital gain
or loss to report which is the difference between your basis in the club and the amount you withdraw.
This amount is reported to you on the withdrawal report you receive and will also be reported on your personal taxes.
Laurie Frederiksen
www.bivio.com
From: Internal Revenue
Service (IRS) [mailto:irs@service.govdelivery.com]
Sent: Friday, February 19, 2010 9:13 AM
To: laurie@bivio.com
Subject: IRS Tax Tip 2010-35: 10 Facts About Capital Gains and Losses
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Issue Number: IRS Tax Tip 2010-35Inside This Issue10 Facts About Capital Gains and Losses Have you heard of capital gains and losses? If not, you may want to read up on them because they might have an impact on your tax return. The IRS wants you to know these ten facts about gains and losses and how they could affect your tax situation. 1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. 2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss. 3. You must report all capital gains. 4. You may deduct capital losses only on investment property, not on property held for personal use. 5. Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. 6. If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any. 7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2009, the maximum capital gains rate for most people is15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%. 8. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately. 9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year. 10. Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13of Form 1040. For more information about reporting capital gains and losses, see the Schedule D instructions, Publication 550, Investment Income and Expenses or Publication 17, Your Federal Income Tax. All forms and publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
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