Chapter 11: The Taxation of Capital Assets

01.Core Concepts

Noncorporate Taxpayers • Capital gains and losses must be netted by holding period. • Short-term capital gains and losses are netted. • Long-term capital gains and losses are netted. • If possible, long-term gains or losses are then netted with short- term gains or losses. • If the result is a loss: • The net capital loss deduction is limited to a maximum deduction of $3,000 per year against ordinary income. • Unused losses retain their character (as to short- or long- term) and are carried forward indefinitely.