Publication 544 |
2001 Tax Year |
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 Gain Tax Rates in
chapter 4. Your deduction for a net capital loss may be limited. See
Treatment of Capital Losses in chapter 4.
Capital gain or loss.
Generally, you will have a capital gain or loss if you sell or
exchange a capital asset. You may also have a capital gain if your
section 1231 transactions result in a net gain.
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.
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