Comments on: Personal Finance 101: Capital Gains Tax

By: Jessie

Jessie — Fri, 31 Jul 2009 17:12:59 +0000

Question regarding Capital Gain on Real Estate:

In 1996 my wife and I purchased a house for $315,000. We lived in this house for 9 years. In March 2006, we purchased another house and moved there. We rented our first home since October of 2006 until September 2008. It is has been vacant since October 2008 and we are on the process of short selling the property. The offer that was submitted to the lender for approval was $670,000. My question is that, if the bank approves the offer at $670,000 are we going to be taxed for capital gain even we lived there for 9 yers in the past? If in case that someone think that we will be paying capital gain, could someone suggest what we should do. By the way, our current mortgage balance was $830,000. Please advice. Thanks.

By: DON DEETS

DON DEETS — Thu, 09 Apr 2009 12:24:42 +0000

??? SHORT TERM LOSSES SUBTRACTED FROM GAINS. WHAT’S THE MOST DOLLAR AMOUNT FOR 1 YEAR THAT CAN BE USED? EXAMPLE PAID 30,000 FOR STOCK-SOLD FOR 20,000. 10,000 LOSS-CAN THIS BE DEDUCTED FROM TOTAL INCOME? DOES THE 3,000 RULE APPLY HERE?
THANKS,DON

By: Alinfavorofa Fairtax

Alinfavorofa Fairtax — Mon, 05 Nov 2007 02:14:14 +0000

We can make this even simpler: fairtax.org

By: Maura

Maura — Tue, 02 Oct 2007 02:39:32 +0000

Dennis,

People who sell on eBay regularly are in a “trade or business”. Their income is business income, not capital gains. Not only do they not get the long-term capital gains treatment, but they may have to pay self-employment tax too.

But if you sell something on eBay that is not a regular business- like selling sports memorabilia that you have collected over the years, or selling an antique you inherited, then you would treat it as a long-term capital gain.

By the way, inherited assets automatically get long-term capital gains treatment but assets acquired by gift may or may not get long-term treatment.

By: MossySF

MossySF — Fri, 20 Jul 2007 14:02:16 +0000

And the initial stock grant is full income. Only the gain ontop the grant is capital gains.

By: MossySF

MossySF — Fri, 20 Jul 2007 14:00:44 +0000

The $1 salary deal only works if your total long term capital gains is less than the max for the 5% bracket. Once LTCG pushes your income above that limit, the rest of it is taxed at 15%. (Which is still better than regular income tax of course.)

By: Jamie

Jamie — Fri, 20 Jul 2007 13:52:40 +0000

Every once in awhile you hear about a CEO taking an annual salary of $1 (Steve Jobs, John Mackey). While this can seem rather noble, there is an ulterior motive. Your Capital Gains tax is determined by your income tax bracket. So, if you only make $1 in a given year, any long term capital gains you incur will be taxed in the lowest bracket (5%). It’s nice that they are helping the company by declining a salary, but it’s not entirely altruistic, in my opinion…

By: Ted Valentine

Ted Valentine — Fri, 20 Jul 2007 13:42:12 +0000

Dennis — If you’ve made a profit on selling an item, you’re supposed to report it as income or a capital gain, as appropriate.

Most regular people not in business that sell things at garage sales or ebay sell things for less than they paid, so there is no income.

By: Dennis

Dennis — Fri, 20 Jul 2007 13:27:23 +0000

Great article! Now in your Wii example, I had a question. How does this work for people who use ebay? Or for people that sell products at garage sales?

By: Brip Blap

Brip Blap — Fri, 20 Jul 2007 10:43:07 +0000

The long-term capital gains tax treatment has got to be one of the very few instances where the tax code actually rewards correct behavior. Too bad there’s not an idea like a “super-long” term capital gains tax, where you don’t pay capital gains at all (or 2%, 5%, etc.) if you hold for 10+ years. That would really encourage people to invest and hold, even people like me who’ve given up on individual stocks in favor of index funds.

By: MoneyNing

MoneyNing — Fri, 20 Jul 2007 06:27:59 +0000

People in other countries should read more on the wikipedia site. Just search captial gains tax in google and you will find it since Trent’s explanation only applies in the states.

Also, capital gains tax also applies to properties (houses) and there are many other taxes thare are associate with it that do not apply to just “stocks”.

Btw, I do not believe re-selling a product is considered capital gains since you are not “gaining” from your capital, as you are merely doing business. The reason why I think it’s not considered capital gains is because all distributors would be filing under capital gains rules which just does not happen.

By: Vernon

Vernon — Fri, 20 Jul 2007 03:20:34 +0000

That is the best explanation of capital gains I have heard. Thanks for making it so simple. By the way, great article in the Des Moines Business Record this week.