Taxation: Federal Income Tax: Treatment of Nondistributable Capital Gains of Domestic Trust with Foreign Beneficiaries

Current income tax provisions bear little resemblance to those enacted by the original law, the Revenue Act of 1913. Because of the progressive nature of the federal income tax, a need for special provisions for capital gains was recognized. In 1921, gains from the sale or disposition of capital assets and certain other capital items were identified and taxed differently from income from other sources. The capital gains provisions resulted in the separation of ordinary and capital gains income.Gains and losses from the sale or exchange of a capital asset and other capital items are classified as either short- or long-term, depending on the period of time the property is held. Income from items held for less than the required period is taxed as ordinary income. Income from items held for longer than the required period receive preferential treatment only if the net long-term gain exceeds the net short-term capital loss. If long-term capital gains are realized, 60 percent of the excess gain is claimable as a deduction; the remaining 40 percent of the net gain is taxed at the taxpayer's ordinary tax rate. If the net short-term capital gain exceeds the net long-term loss, 100 percent of the excess is taxable at the normal rate.

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Federal Income Tax: Capital Gains and Losses

Harvard Law Review ◽

10.2307/1332602 ◽

1935 ◽

Vol 49 (2) ◽

pp. 262

Author(s):

Homer Hendricks

Keyword(s):

Income Tax ◽

Capital Gains ◽

Federal Income Tax ◽

Gains And Losses

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Learning The Ropes: An Introductory Tax Return Case

Journal of Business Case Studies (JBCS) ◽

10.19030/jbcs.v7i1.1584 ◽

2011 ◽

Vol 7 (1) ◽

Author(s):

Kevin E. Flynn ◽

Lori R. Fuller ◽

Peter Oehlers

Keyword(s):

Income Tax ◽

Capital Gains ◽

Income Taxation ◽

Internal Revenue Service ◽

Complex Case ◽

The Internet ◽

Extant Literature ◽

Federal Income Tax ◽

Standard Deduction ◽

Gains And Losses

In extant literature, there are few tax return cases appearing in journals. We present a complex case using a realistic scenario that is designed to be an introductory tax return assignment used in an individual federal income taxation course. The case is designed to teach students how to manually prepare a federal income tax return using the actual forms and schedules prepared by the Internal Revenue Service (IRS). This case is timely for two reasons. 1) Often tax return assignments in textbooks involve concepts that a student has yet to learn. For example, a textbook assignment often includes itemized deductions and credits, even though these topics are typically taught towards the end of an individual tax course. 2) In addition, with the availability of information on the internet, students have greater access to solutions to textbook assignments. This case comprehensively examines concepts typically covered in the first three or four chapters of an individual tax text: various types of income, exclusions, personal and dependency exemptions, capital gains and losses, and the standard deduction.

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