What are capital assets?

Nearly everything owned by taxpayers is considered a capital asset. It doesn’t matter whether the taxpayer uses the property for personal or investment purposes. The most common capital asset owned by U.S. taxpayers is their primary residence. Other examples of capital assets include household furnishings, stocks and bonds held in a personal account, and jewelry.

→ Read More

What is installment reporting of capital gains?

Installment reporting is the process of spacing out reported gains over the duration of an installment plan. If you sell a capital asset under an installment agreement in which you receive partial payment and the promise of the purchaser to pay the balance of the price over time, you normally will be able to report gain over the period of payments. The installment reporting rules are quite complicated, especially if the amount of the sale price is quite large,so any party reporting gains under an installment agreement should consult an experienced attorney.

→ Read More

How are capital gains taxed?

A capital gains tax is essentially a tax on a profit made from the sale of a capital asset, and is assessed depending on the nature of the asset sold. For example, if you sell a rental house at a substantial profit, the proceeds would be subject to a capital gains tax. Capital gains taxes do not cover the general sale of inventory, so if you operate a small business out of your home the proceeds on the sale of your product would not be subject to a capital gains tax.

→ Read More