The Waterbury Democrat., 1938-02-11
Your Income Tax


 CAPITAL GAINS AND LOSSES
 Section IF of the Revenue Act of 1886 deals with the manner or method of taking into account in computing net income gains and losses resulting from the sale or ex- change of capital assets as com puted and recognized under sections | III, 112, and 113.
 Section IF (a) provides that in the case of taxpayer other than a corporation only the following per centages of the gain or loss recog- nized upon the sale or exchange of capital asset shall be taken into account in computing net income :: 100 percent if the capital asset has been held for not more than l year; 30 percent if the capital asset has been held for more than year but not for more than 2 years; 60 per- cent if the capital asset has been held for more than 2 years but not for more than 5 years; 40 percent if the capital asset has been held for more than 5 years but not for more than 10 years; 30 percent if the capital asset has been held for more than 10 years.
 Section IF (b) defines capital as- sets as property held by the tax payer (whether or not connected wiht his trade or businesS), eX- pressly excluding therefrom stock in trade of the taxpayer or other prop erty of a kind which would properly be included in the inventory of the taXpaper if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business. In this definition the length of time the asset was held by the taxpayer is disregarded.
 Section IF Co provides the rules for determining the period for which capital asset has been held. These provisions are in general to the effect that, where property is ac- quired in an exchange and the prop erty so acquired retains the old basis on which to complete gain or loss or where property is acquired from another person and the prop erty retains the same basis on which to complete 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 dur ing which the property was held by such former owner is also to be included in determining the period for which the property is held for the purpose of section TIT (a). Section IF (d) provides a very important limitation affecting all taxpayers (including corporations, except with respect to banks and trust companies), that is that losses from sales or exchanges of capital assets shall be allowed only to the extent of $2,O00 plus the gains from such sales or exchanges.
 Section IF (e) provides that gains or losses from short sales" of property, and gains or losses attri- butable to the failure to exercise privileges or options to buy or sell property, shall be considered as 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 com- puted according to the period for which the property delivered was held In the latter the gains or losses shall be considered as arising from sales or exchanges of capital assets held for year or less.
 Section TIT dO provides that amounts received upon the retire ment of corporate bonds and similar evidences of corporate indebtedness, with interesS coupons or in register ed form, shall be considered as amounts received in exchange there for, thGs giving to any gain or loss thereby resulting to the holder the status of capital gain or loss, as the case may be.