Maximum tax rate on qualified dividends and net capital gain reduced. Beginning in 2008, the 5% maximum tax rate on qualified dividends and net capital gain (the excess of net long-term capital gain over net short-term capital loss) is reduced to 0 (zero)%. This reduction applies for both regular and alternative minimum tax. The 15% maximum tax rate on qualified dividends and net capital gain has not changed.

Tax on child's investment income. Form 8615 is required to figure the tax for a child with investment income more than $1,800 if the child:

The election to report a child's investment income on a parent's return and the special rule for when a child must file Form 6251 also now apply to the children listed above. For more information, see Tax on investment income of certain children under General Information in chapter 1.

Like-kind exchanges. The trade of stock in a mutual ditch, reservoir, or irrigation company may qualify as a like-kind exchange. For more information, see Like-Kind Exchanges in chapter 4.

Worthless securities. Worthless securities may include stock abandoned after March 12, 2008. For more information, see Worthless Securities in chapter 4.

U.S. property acquired from a foreign person. If you acquire a U.S. real property interest from a foreign person or firm, you may have to withhold income tax on the amount you pay for the property (including cash, the fair market value of other property, and any assumed liability). Domestic or foreign corporations, partnerships, trusts, and estates may also have to withhold on certain distributions and other transactions involving U.S. real property interests. If you fail to withhold, you may be held liable for the tax, penalties that apply, and interest. For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

Foreign source income. If you are a U.S. citizen with investment income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U.S. law. This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer.

Alien's individual taxpayer identification number (ITIN). If you are a nonresident or resident alien and do not have and are not eligible to get a social security number (SSN), you must apply for an ITIN. For details on how to do so, see Form W-7, Application for IRS Individual Taxpayer Identification Number, and its instructions. If you already have an ITIN, enter it wherever an SSN is requested on your tax return.An ITIN is for tax use only. It does not entitle you to social security benefits or change your employment or immigration status under U.S. law.

Sale of DC Zone assets. Investments in District of Columbia Enterprise Zone (DC Zone) assets acquired after 1997 and held more than 5 years will qualify for a special tax benefit. If you sell or trade a DC Zone asset at a gain, you may be able to exclude the qualified capital gain from your gross income. This exclusion applies to an interest in, or property of, certain businesses operating in the District of Columbia. For more information about the exclusion, see the Schedule D instructions. For more information about DC Zone assets, see Publication 954, Tax Incentives for Distressed Communities.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

This publication provides information on the tax treatment of investment income and expenses. It explains what investment income is taxable and what investment expenses are deductible. It explains when and how to show these items on your tax return. It also explains how to determine and report gains and losses on the disposition of investment property and provides information on property trades and tax shelters.