Evening star., 1936-02-19
Your Income Tax
Capital Gains and Losses.

Section 1T Of the revenue act Of
1884 deals with the manner or method
Of taking into account in computing
net income gains and loesss from the
sale or exchange Of capital assets as
computed and recognized under Sec
tions Ill, 112 and l13.
Section 1T (a) provides that in the
case of taxpayer other than a cor
poration only the following percent
ages of the gain or loss recognized
upon the sale or exchange Of capital
asset shall be taken into account in
computing net income: One hundred
per cent if the capital asset has been
held for not more than one year; 80
per cent If the capital asset has been
held for more than one year, but not
for more than two years; so per cent
If the capital asset has been held for
more than two years, but not for more
than five years; 40 per cent If the
capital asset has been held for more
than five years, but not for more
than 10 years; 80 per cent If the
capital asset has been held for more
than 10 years.
Capital Assets Defined.
Section 1T (b) defines capital as
sets as property held by the taxpayer
whether or not connected with his
trade or business), but does not in
clude stock in trade Of the taxpayer
or other property of a kind which
would properly be included in the in
ventory of the taxpayer If on hand
at the close of the taxable year. or
property held by the taxpayer pri-
marily for sale to customers in the
ordinary course Of his trade or busi-
ness. In this definition the length
Of time the asset was held by the tax
payer Is disregarded.
Section lit (c) provides the rules
for determining the period for which
q capital asset has been held and Is
similar to the provisions Of section
l0l (c) 90 of the revenue act Of
1882. These provisions are in general
to the effect that, where property is
acquired in an exchange and the
property so acquired retains the old
basis on which to compute gain or
loss or where property is acquired
from another person and the prop
erty retains the same basis on which
TO compute gain or loss as it had in
the hands of the person from whom
it was so acquired, the period for
which the property disposed Of in the
exchange or the period during which
the property was held by such former
owner is also to be included in de-
termining the period for which the
property Is held for the purpose Of
section lit (a).
Section lit (d) provides very i'm
portant limitation affecting ali tax
PAYERS (including corporations, except
with respect to banks and trust COM
panies), that is. that losses from sales
or exchanges Of capital assets shall
be allowed only to the extent Of $4,000
plus the gains from such sales or
exchanges.
Time Element Weighed.
Section lit (e) provides that gains
or losses from short sales" of prop
erty, and gains or losses attributable
to the failure to exercise privileges or
options to buy or sell property, shall
be considered ss gains or losses from
sales or exchanges of capital assets.
In the former the percentage of the
gain or loss to be taken into account
shall be computed according to the
period for which the property deliv-
cred was held. In the latter the gains
or losses shall be considered as arising
from sales or exchanges Of capital as
sets held for one year or less.
Section lit ~ provides that
amounts received upon the retirement
Of corporate bonds and similar evil
dences Of corporate Indebtedness, with
interest coupons or in registered form,
shall be considered as amounts re-
ceived In exchange therefor, thus Civ
ing to any gain or loss thereby result
ing to the holder the status Of capital
Rain or loss, g. the case may be.