The Wilmington morning star., 1940-02-22
Your u. S.
..ncon1e Tax
CAPITAL GAINS AND LOSSES


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 nroperty of a kind which would
properly be included in the inventory
of the taxpayer if on hand at the
close of the taxable year, or proper
ty held by the taxpayer primarily
for sale to customers in the ordinary
course of his trade or business, or
property, used in the trade or busi-
ness. of a character which is subject
to the allowance for depreciation
provided in section 23Q).
Capital gains and losses are class
flied as "short-term" applicable to
capital assets held for 1S months or
less) and 'Iong-term" (applicable to
capital assets held for more than 18
months). Such gains and losses are
taken into consideration in the per.
centages shown on the return, based
upon the period of time during
which the assets were held.
Short-term capital losses are al
Iowable only to the extent of short
term capital gains. However, any
net short.term capital loss mot in
excess of the net income for the
taxable year, may be carried over
to the succeeding year and applied
against the short term capital gains
not already offset by short-term
capital losses in such year. The car
ry.over is restricted to 1 year.
In the case of net long-term cap.
lital gain or loss, an alternative tax
is imposed with respect to a gain if
such tax is less than the normal tax
and surtax on net income, and in
the event of a loss, such alternative
tax is imposed if greater than the
normal tax and surtax on net in
come. In calculating the alternative
tax in the case of long-term cap
ital loss, the bases for computing
(a) the Is per cent limitation with
respect to any deduction for char
liable contributions is the ordinary
net income" increased by the amount
of the charitable contributions, and
(b) for computing the earned-income
adjusted for the charitable contribu
tions deduction.
A husband and wife, whether a
joint or separate return is made, are
separate taxpayers insofar as short
term capital gains and losses are
concerned. Hence, such gains and
losses of one spouse may not be off
set against the gains and losses o1
the other. In a joint return, such
limitation does not apply to long
term capital gains and losses, but
capital transactions of each must be
shown in separate schedules.
No deduction is allowable fol
losses from sales or exchanges ot
property, directly or indirectly, be
tween (a) members of a family, (b
a corporation and an individual
owning more than so per cent of its
stock Qiquidations excepted), (c) 6
grantor and fiduciary Of any trust
or (d) a fiduciary and beneficiary
of the same trust. (Sec. 118.) MOI
are losses from the sale or othel
disposition of stock or securities al
lowable (unless sustained in connec
ton with the taxpayers trade OF
business) if, within 80 days before
or after the date of sale or Other
disposition, the taxpayer has acquir
ed (by purchase or by an exchange
upon which the entire amount OF
gain or loss was recognized by law
or has entered into contract OF
option to acquire, substantially
identical stock or securities.
If D shares of stock become
worthless during the year, or q
lcorporate securities with interes
lcoupons or in registered form are
ascertained to be worthless an6
charged off during the year, are
lcapital assets, the loss therefron
shall be considered as from the salt
or exchange of capital assets as Of
the last day of such taxable year.
In determining gain" in case O.
property acquired before March l
1913, the cost, or the fair marke
value as of March 1, 1913, adjusted
as provided in section 113Cb), a!
amended by sections 215 and 223 o!
the Revenue Act Of 1889, whichevel
is greater, should be used, and IL
determining "loss" the cost, so ad
justed, should be used. If the prop
erty was acquired after Februar.
%, 1913, the cost, except as other
wise provided in section 1l3, a:
amended by sections 213, 214, 2l5
and 223 of the Revenue Act of 1889
lshould be used.
The taxpayers return should state
the following facts: (a) For rea
estate, the location and description
of land and improvements; b) fol
bonds or other evidences of indebt
edness, name of issuing corporation
particular issue, denomination, ane
amount and (c) for stocks, name Of
corporation, class Of stock, number
of shares, and capital charges at
fecting basis Gncluding nontaxable
Idistributions.)
MnDhI Enid ADH0EH