Archive for the ‘Capital Gains’ Category

Don’t Sell on Leap Day

February 27, 2016

Capital Gains_100x150We issue this warning once every four years: if you bought an investment on February 28 last year, and you plan to sell it for a long-term capital gain, you need to delay your sale until March 1. This is because of a little-known technicality. Strictly speaking, your holding period for a capital asset includes the day of sale but not the day of purchase. Stock or other assets bought on February 28, 2015 have a holding period that began March 1, 2015, so you have to hold until March 1, 2016 to have a long-term gain. It may seem logical that selling on Leap Day would satisfy the year-and-a-day rule when the purchase was on February 28 of the previous year, but that would be leaping to the wrong conclusion.

An Easier Way to Report Capital Gains

February 27, 2015

Taxation of InvestorsIf you have more than a few sales of stocks, mutual funds or other investments to report on your tax return, you may want to be aware of a recent change in IRS requirements for reporting these transactions.

details: Easier Capital Gains Reporting

New Capital Gains Book Available

January 6, 2015

The 2015 edition of our capital gains book, Capital Gains, Minimal Taxes, is now available. This is a major revision from the previous edition, covering changes in tax rates, broker reporting, mutual fund averaging, and the net investment income tax, among other enhancements.

more info  |  order from

Share Identification Under Attack

January 3, 2014

Taxation of InvestorsOne of the oldest rules in the tax law allows investors to choose which shares are being sold when disposing of part of their holdings in a particular stock. Both President Obama and Dave Camp, Republican Chair of the House Ways and Means Committee, have proposed doing away with this important rule. Our new article in the Journal of Taxation of Investments (subscription required) explains why repeal of share identification would be a policy blunder, accomplishing nothing and creating unnecessary problems for investors. Why aren’t more people objecting to these proposals?

read more: In Defense of Share Identification

The Mindbending World of Wash Sale Calculations

March 2, 2013
By Kaye A. Thomas

If you’ve made multiple purchases and sales of stock in the same company (or shares of the same mutual fund) within the same year, you may have been surprised at what was reported on Form 1099-B. This report of the tax consequences of your sales may seem to bear little relationship to the actual activity in your account. If your trading activity includes wash sales, it may be all but impossible for you to determine whether the results reported on this form are correct. From what I’ve seen, there’s a good chance they aren’t.


Gaps in Cost Basis Reporting

February 6, 2013
By Kaye A. Thomas

Brokers and mutual fund companies are now required to report your cost basis and holding period in addition to sales proceeds when you sell shares. The requirement doesn’t apply to all shares, however. What’s more, even when they follow all the rules, brokers may report incorrect figures. Taxpayers can’t rely blindly on these reports.

Tax Rules Extended by ATRA

January 12, 2013

The American Taxpayer Relief Act of 2012 provides “taxpayer relief” primarily by extending tax benefits that were scheduled to expire. Here is a list of the extensions that are of most interest to individual taxpayers. Changes labeled “permanent” can be altered by an Act of Congress but will not expire automatically.

ATRA Tax Rates for Capital Gain and Dividends

January 12, 2013

The American Taxpayer Relief Act of 2013 (“ATRA”) made important changes in the way long-term capital gain and qualified dividend income are taxed. Here’s an explanation, in Q&A format.


American Taxpayer Relief Act

January 3, 2013
By Kaye A. Thomas

In a last gasp effort Congress passed legislation to avert the fiscal cliff and prevent tax increases on 98% of Americans. Key features of the American Taxpayer Relief Act of 2012 (“ATRA”) include the following:

  • Existing income tax rates (including marriage penalty relief) are preserved for taxpayers with income up to $400,000 ($450,000 for couples filing jointly). A tax rate of 39.6% applies above that level.
  • Qualified dividends will continue to be taxed at capital gain rates, but a 20% rate will apply to both of these beginning at the income thresholds mentioned above.
  • The personal exemption phaseout and the Pease rule for reducing itemized deductions are revived, but at higher income levels than under prior law.
  • The law permanently fixes the alternative minimum tax (“AMT”), eliminating the recurring need for an “AMT patch.”
  • Seemingly out of nowhere, the law expands the availability of in-plan Roth conversions.
  • The estate tax provisions are more generous than might have been expected, retaining the $5 million exemption and raising the rate by only 5 percentage points, to 40%.


Demutualization Soup: Another Ruling

July 25, 2012
By Kaye A. Thomas

Nearly four years after the first ruling in a demutualization case we have another one—and it’s inconsistent with the first one. At issue is the proper treatment of taxpayers who receive shares of stock when a mutual insurance company that issued policies to them converts into a regular corporation. The IRS has long taken the position that these shares have zero basis, so that when they are sold, the entire proceeds must be reported as capital gain. The Court of Federal Claims rejected that position in 2008, and in addition found that the open transaction doctrine applied, so that the selling shareholders would report zero gain on the sale.


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