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Taxmap/pubs/p544-011.htm#TXMP12ae4355 Chapter 2 Ordinary   or Capital   Gain or Loss

Sale of Property, Gain or Loss

Introduction

You must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). You must do this to figure your net capital gain or loss.

For individuals, a net capital gain may be taxed at a lower tax rate than ordinary income. See Capital Gains Tax Rates in chapter 4. Your deduction for a net capital loss may be limited. See Treatment of Capital Losses in chapter 4.

Taxmap/pubs/p544-011.htm#TXMP332ac5ca Capital gain or loss.

Generally, you will have a capital gain or loss if you sell or exchange a capital asset. You also may have a capital gain if your section 1231 transactions result in a net gain.

Taxmap/pubs/p544-011.htm#TXMP26091ecd Section 1231 transactions.

Section 1231 transactions are sales and exchanges of property held longer than 1 year and either used in a trade or business or held for the production of rents or royalties. They also include certain involuntary conversions of business or investment property, including capital assets. See Section 1231 Gains and Losses in chapter 3 for more information.

Useful items

You may want to see:

See chapter 5 for information about getting publications and forms.

Taxmap/pubs/p544-011.htm#TXMP0aa22eb8 Capital Assets

Capital Assets

Almost everything you own and use for personal purposes or investment is a capital asset. For exceptions, see Noncapital Assets, later.

The following items are examples of capital assets.

• Stocks and bonds.
• A home owned and occupied by you and your family.
• Timber grown on your home property or investment property, even if you make casual sales of the timber.
• Household furnishings.
• A car used for pleasure or commuting.
• Coin or stamp collections.
• Gems and jewelry.
• Gold, silver, and other metals.

Taxmap/pubs/p544-011.htm#TXMP36bcd44c Personal-use property.

Property held for personal use is a capital asset. Gain from a sale or exchange of that property is a capital gain. Loss from the sale or exchange of that property is not deductible. You can deduct a loss relating to personal-use property only if it results from a casualty or theft.

Taxmap/pubs/p544-011.htm#TXMP2f85e701 Investment property.

Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. This treatment does not apply to property used to produce rental income. See Business assets, later, under Noncapital Assets.

Taxmap/pubs/p544-011.htm#TXMP793d142f Release of restriction on land.

Amounts you receive for the release of a restrictive covenant in a deed to land are treated as proceeds from the sale of a capital asset.

Previous Page:  Publication 544 - Sales and other Dispositions of Assets - Exclusion of Gain From Sale of DC Zone Assets Next Page:  Publication 544 - Sales and other Dispositions of Assets - Noncapital Assets Use     to find additional instances of index items.