The Waterbury Democrat., 1944-02-19
YOUR FEDERAL INCOME TAX
GAINS AND LOSSES

The tax laws provide a special set of rules for figuring the gain or loss resulting from the sale or exchange of securities and other property which is held for profit or invest ment. Although these rules are ex- tremely technical, only compara- lively small percentage of taxpayers are affected by them.
 Persons having this type of trans actions must fill in a separate form called Schedule B, and file it along with the tax return Form 1040. Short Form 1040A may not be used by these taxpayers.
 These transactions include gain or loss from the sale or exchange of property held for profit or in vestment, or used in the taXpay- CTS business, but not a part of the stock in trade. Such transactions may occur in real estate, or other tangible property, such as store fix lures or plant machinery and equip ment, or such personal possessions as a car or household goods. The law requires gains or losses to be reported according to the na- ture of the transaction, and two separate entries are provided in item of Form 1040 for this purpose: (a) net gain Cor loss) from sale or exchange of capital assets, (b) net gain Cor 1osS) from sale or exchange of property other than capital as- sets.
 A distinction is made between capital assets and 'other than capi- tai assets" The latter includes pri- marily property subject to the al- lowance for depreciation, and land used in the trade or business and held for more than six months where losses from sale or involuntary con- version of such property exceed the losses. the transactions are treated in the same manner as a sale of cap- ital assets, and if the gains do not exceed the losses, they are treated in the same manner as sale of ordi- nary assets (other than capital as- sets).
 On property classified as "otfer than capital assets the full amount of the gain Cor loss) from sale or exchange is taken into the income account in item 6(b) of the return Form 1040, and an explanation of the transaction is shown in Sched- ule 8.
 In transactions in capital assets, such as nondepreciable property, and securities, the amount of gain or loss taken into the income account, ] in item 6(a). is subject to certain Limitations For such property held for not more than six months. the entire amount of the net gain or loss Is considered in arriving at the net amount to be shown, while for prop erty held more than six months, only one half of the net gain or loss is considered. The combined net gain is entered in item 6(a) of the return. If. however, the result Is a net loss. then tine amount which may be entered is limited to the net loss, or to 5000, or to the amount of the taxpayers net income from other slrces, whichever is the small est. In arriving at the net figure, also losses of this character for a preceding year may be used as an offset, within certain limitations. and the net results of such transactions 1 on partnership or common trust fund accounts must be included.
 It should be noted that in the case of sale or exchange of property, such as the taxpayers residence, au- tomobile, house furnishings, or jewelry, gains must be taken into income but losses are not allowed to be so taken. Such property, not being depreciable. for income tax purposes. would classify as capital assets. and the treatment of gains would be governed as stated above