Unraveling the Complexity of Capital Gain and Loss Transactions
The current capital gain and loss provisions, especially when combined with the casualty and theft and sale or exchange of business property provisions, are very challenging from both a planning and reporting perspective. The American Institute of Certified Public Accountants (AICPA) and the Joint Committee on Taxation recently identified individual capital gains and losses as an area requiring simplification. This article explores how the complexity of capital gain and loss provisions arose by first tracing the evolution of the capital gains provisions from the Revenue Act of 1913 through changes made by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Tables, figures, and a spreadsheet are used to illustrate this complexity. The spreadsheet also serves as a comprehensive planning tool for taxpayers considering additional property transactions during the tax year. A modest proposal for simplifying the capital gain and loss provisions is compared to recent simplification proposals.