Chapter 5

Reporting Property Sales

Long-term capital gains are generally taxed at lower rates than those imposed on ordinary income. Depending on your taxable income, some or all of your long-term capital gains for 2012 may qualify for a 0% rate and thus completely avoid tax (5.3). If the 0% rate does not apply, your 2012 long-term gains are subject to maximum rates of 15%, 25%, or 28%, depending on the asset sold (5.3), but regular tax rates apply if they result in a lower tax than the maximum rate.

If in 2012 you sold property and will be receiving payments in a later year, you may report the sale as an installment sale on Form 6252 and spread the tax on your gain over the installment period (5.21).

Sales of business assets and depreciable rental property are reported on Form 4797. Most assets used in a business are considered Section 1231 assets, and capital gain or ordinary loss treatment may apply depending upon the result of a netting computation made on Form 4797 for all such assets sold during the year (44.8).

Special types of sale situations are detailed in other chapters.

See Chapter 29 for the exclusion of gain on the sale of a principal residence.

See Chapter 32 for figuring gain or loss on the sale of mutual-fund shares.

See Chapter 6 for tax-free exchanges of property.

See Chapter 30 for sales of stock dividends, stock rights, wash sales, short sales, and sales by traders in securities.

5.1 General Tax Rules for Property Sales

5.2 How Property Sales Are Classified and Taxed

5.3 Capital Gains Rates and Holding Periods

5.4 Capital Losses and Carryovers

5.5 Capital Losses of Married Couples

5.6 Losses May Be Disallowed on Sales to Related Persons

5.7 Deferring or Excluding Gain on Small Business Stock Investment

5.8 Sample Entries of Capital Asset Sales on Form 8949 and on Schedule D

5.9 Counting the Months in Your Holding Period

5.10 Holding Period for Securities

5.11 Holding Period for Real Estate

5.12 Holding Period: Gifts, Inheritances, and Other Property

5.13 Calculating Gain or Loss

5.14 Amount Realized Is the Total Selling Price

5.15 Finding Your Cost

5.16 Unadjusted Basis of Your Property

5.17 Basis of Property You Inherited or Received as a Gift

5.18 Joint Tenancy Basis Rules for Surviving Tenants

5.19 Allocating Cost Among Several Assets

5.20 How To Find Adjusted Basis

5.21 Tax Advantage of Installment Sales

5.22 Figuring the Taxable Part of Installment Payments

5.23 Electing Not To Report on the Installment Method

5.24 Restriction on Installment Sales to Relatives

5.25 Contingent Payment Sales

5.26 Using Escrow and Other Security Arrangements

5.27 Minimum Interest on Deferred Payment Sales

5.28 Dispositions of Installment Notes

5.29 Repossession of Personal Property Sold on Installment

5.30 Boot in Like-Kind Exchange Payable in Installments

5.31 “Interest” Tax on Sales Over $150,000 Plus $5 Million Debt

5.32 Worthless Securities

5.33 Tax Consequences of Bad Debts

5.34 Four Rules To Prove a Bad Debt Deduction

5.35 Family Bad Debts