As a general rule, should a taxpayer make the special Code Sec. 163(d) (4) (B) election to have long-term capital gains incurred during the year treated as investment income for investment interest limitation purposes? Explain.

As a general rule, should a taxpayer make the special Code Sec. 163(d) (4) (B) election to have long-term capital gains incurred during the year treated as investment income for investment interest limitation purposes? Explain.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter6: Deductions And Losses: In General

Section: Chapter Questions

Problem 10DQ

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

As a general rule, should a taxpayer make
the special Code Sec. 163(d)(4)(B) election
to have long-term capital gains incurred
during the year treated as investment income
for investment interest limitation purposes?
Explain.

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